UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

OR

☐      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-38315

CURO GROUP HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

Delaware	90-0934597
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3615 North Ridge Road, Wichita, KS	67205
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (316) 722-3801

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.001 par value per share	CURO	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Emerging growth company	☐
Smaller reporting company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

The aggregate market value of 23,296,369 shares of the registrant’s common stock, par value $0.001 per share, held by non-affiliates on June 30, 2021 was approximately $396,038,273.

At March 3, 2022 there were 40,242,120 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

Documents incorporated by reference:

Portions of the definitive proxy statement for the registrant's Annual Meeting of Stockholders expected to be held on June 15, 2022 are incorporated by reference into Part III of this report.

CURO GROUP HOLDINGS CORP. AND SUBSIDIARIES

YEAR ENDED December 31, 2021

TABLE OF CONTENTS

PART I
	Forward Looking Statements	1
Item 1.	Business	1
Item 1A.	Risk Factors	24
Item 1B.	Unresolved Staff Comments	37
Item 2.	Properties	37
Item 3.	Legal Proceedings	37
Item 4.	Mine Safety Disclosures	37
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	37
Item 6.	[Reserved]	38
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	64
Item 8.	Financial Statements and Supplementary Data	65
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	121
Item 9A.	Controls and Procedures	121
Item 9B.	Other Information	122
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.	122
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	122
Item 11.	Executive Compensation	122
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	122
Item 13.	Certain Relationships and Related Transactions, and Director Independence	122
Item 14.	Principal Accountant Fees and Services	110
PART IV
Item 15.	Exhibits, Financial Statement Schedules	124
Item 16.	Form 10-K Summary	124
	Signatures	130

GLOSSARY

Terms and abbreviations used throughout this report are defined below.

Term or abbreviation	Definition
2017 Final CFPB Rule	The final rule issued by the CFPB in 2017 regarding Payday, Vehicle Title and Certain high Cost Installment loans.
2017 Tax Act	Tax Cuts and Jobs Act of 2017
2019 Proposed Rule	The proposed rule issued by the CFPB in 2019 which would rescind the mandatory underwriting provisions of the 2017 Final CFPB Rule.
2020 Final CFPB Rule	The final rule issued by the CFPB in 2020 which rescinded part of the 2017 Final CFPB Payday Rule
2020 Form 10-K	Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 5,2021
2021 Form 10-K	Annual Report on Form 10-K for the year ended December 31, 2021
7.50% Senior Secured Notes	7.50% Senior Secured Notes, issued in July 2021 for $750.0 million and subsequently increased to $1.0 billion in December 2021, and mature in August 2028
8.25% Senior Secured Notes	8.25% Senior Secured Notes, issued in August 2018 for $690.0 million, which were repaid in full in the third quarter of 2021
AB 539	California Assembly Bill 539, which imposes an annual interest rate cap of 36% plus Federal Funds Rate on all consumer loans in California between $2,500 and $10,000
Ad Astra	Ad Astra Recovery Services, Inc., our former exclusive provider of third-party collection services for the U.S. business that we acquired in January 2020
Adjusted EBITDA	EBITDA plus or minus certain non-cash and other adjusting items; Refer to "Supplemental Non-GAAP Financial Information" for additional details
ALL	Allowance for loan losses
Allowance coverage	Allowance for loan losses as a percentage of gross loans receivable
AOCI	Accumulated Other Comprehensive Income (Loss)
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Average gross loans receivable	Utilized to calculate product yield and NCO rates; calculated as average of beginning of quarter and end of quarter gross loans receivable
BNPL	Buy-Now-Pay-Later
bps	Basis points
C$	Canadian dollar
CAB	Credit Access Business
Canada SPV	A four-year, non-recourse revolving credit facility with Waterfall Asset Management, LLC with capacity up to C$250.0 million
CARES Act	Coronavirus Aid, Relief, and Economic Security Act
CURO Canada	CURO Canada Corp, a wholly-owned Canadian subsidiary of the Company, formerly known as Cash Money Cheque Cashing Inc.
Cash Money Revolving Credit Facility	C$10.0 million revolving credit facility with Royal Bank of Canada
CDOR	Canadian Dollar Offered Rate
CFPB	Consumer Financial Protection Bureau
CFSA	Community Financial Services Association
CODM	Chief Operating Decision Maker
COVID-19 Impacts	Factors that impacted year-over-year comparisons caused by the COVID-19 pandemic, including lower consumer demand, increased or accelerated repayments and favorable payment trends as customers benefited from government stimulus programs
CSO	Credit services organization
CSO fee	A fee charged to customers for loans Guaranteed by the Company
CURO Canada Receivables Limited Partnership	A Canadian bankruptcy remote special purpose vehicle and an indirect wholly-owned subsidiary of the Company
CURO Receivables Finance II, LLC	A U.S. bankruptcy remote special purpose vehicle and an indirect wholly-owned subsidiary of the Company
EBITDA	Earnings Before Interest, Taxes, Depreciation and Amortization
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
FFL	Friedman Fleischer & Lowe Capital Partners II, L.P. and its affiliated investment funds

Term or abbreviation	Definition
FinServ	FinServ Acquisition Corp. a publicly traded special purpose acquisition company (trading symbol FSRV)
FinTech	Financial Technology; the term used to describe any technology that delivers financial services through software, such as online banking, mobile payment apps or cryptocurrency
Flexiti	Flexiti Financial Inc., a wholly-owned Canadian subsidiary of the Company, which we acquired on March 10, 2021
Flexiti Securitization	A non-recourse revolving credit facility, entered into on December 9, 2021, with capacity up to C$526.5 million
Flexiti SPE	A non-recourse revolving credit facility, entered into concurrent with the acquisition of Flexiti, with capacity up to C$500.0 million
Gross Combined Loans Receivable	Gross loans receivable plus loans originated by third-party lenders which are Guaranteed by the Company
GST	Goods and Services Tax
Guaranteed by the Company	Loans originated by third-party lenders through CSO program that we guarantee but do not include in the Consolidated Financial Statements
Heights	SouthernCo, Inc., a Delaware corporation d/b/a Heights Finance, a wholly-owned U.S. subsidiary of the Company, which we acquired on December 27, 2021
Heights SPV	A non-recourse revolving credit facility, entered into concurrent with the acquisition of Heights, with capacity up to $350.0 million
Katapult	Katapult Holdings, Inc., a lease-to-own platform for online, brick and mortar and omni-channel retailers
ICFR	Internal control over financial reporting
LFL	LFL Group, Canada's largest home furnishings retailer
LIBOR	London Inter-Bank Offered Rate
MDR	Merchant discount revenue
NASDAQ	National Association of Securities Dealer Automated Quotation
NCO	Net charge-off; total charge-offs less total recoveries
NOL	Net operating loss
NYSE	New York Stock Exchange
POS	Point-of-sale
ROU	Right of use
RSU	Restricted Stock Unit
SEC	Securities and Exchange Commission
Senior Revolver	Senior Secured Revolving Loan Facility with borrowing capacity of $50.0 million
Sequential	The change from one calendar quarter to the next calendar quarter
SOFR	Secured Overnight Financing Rate
SPAC	Special Purpose Acquisition Company
SPE	Special Purpose Entity
SPV	Special Purpose Vehicle
SRC	Smaller Reporting Company as defined by the SEC
TDR	Troubled Debt Restructuring. Debt restructuring in which a concession is granted to the borrower as a result of economic or legal reasons related to the borrower's financial difficulties
U.K. Subsidiaries	Collectively, Curo Transatlantic Limited and SRC Transatlantic Limited
U.S.	United States of America
U.S. GAAP	Generally Accepted Accounting Principles in the U.S.
U.S. SPV	A four-year, asset-backed, non-recourse revolving credit facility with Atalaya Capital Management with capacity up to $200.0 million if certain conditions are met
Verge Credit loans	Loans originated and funded by a third-party bank
VIE	Variable Interest Entity; our wholly-owned, bankruptcy-remote special purpose subsidiaries

FORWARD LOOKING STATEMENTS]

This report contains forward-looking statements. Such statements may be identified by words such as believe, expect, anticipate, intend, plan, estimate, may increase, may fluctuate and similar expressions or future or conditional verbs such as will, should, would and could. The matters discussed in these forward-looking statements are subject to risk, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Except as required by applicable law and regulations, we undertake no obligation to update any forward-looking statements or other statements we may make in the following discussion or elsewhere in this document even though these statements may be affected by events or circumstances occurring after the forward-looking statements or other statements were made. Please see the section titled “Risk Factors” below for a discussion of the uncertainties, risks and assumptions associated with our business.

PART I

The terms "CURO," "we," "our," "us" and "Company" include CURO Group Holdings Corp. and all of its direct and indirect subsidiaries as a combined entity, except where otherwise stated.

This report references third-party reports and studies solely for informational purposes only. Investors and market participants should not place undue reliance on such references, and the underlying reports and studies are not part of this report.

ITEM 1.         BUSINESS

Company Overview

We are a tech-enabled, omni-channel consumer finance company serving non-prime and prime consumers in the U.S. and Canada. CURO was founded in 1997 to meet the growing consumer need for short-term loans. With more than 20 years of experience, we offer a variety of convenient, accessible financial and loan services across all of our markets.

We operate in the U.S. under several principal brands, including “Speedy Cash,” “Rapid Cash” and “Avio Credit” and, subsequent to our acquisition of Heights, "Covington Credit," "Heights Finance," "Quick Credit" and "Southern Finance." We also offer demand deposit accounts in the U.S. under Revolve Finance, and credit card programs under First Phase, which we launched in the fourth quarter of 2021. As of December 31, 2021, our store network consisted of 550 locations across 20 U.S. states and we offered our online services in 27 U.S. states.

In Canada, we operate under “CURO Canada” and “LendDirect” direct lending brands and the "Flexiti" point-of-sale brand. As of December 31, 2021, we operated our direct lending in eight Canadian provinces and offered our online services in eight Canadian provinces and one Canadian territory. Our point-of-sale operations are available at nearly 7,500 retail locations and over 3,100 merchant partners across 10 provinces and two territories.

In recent years, we have diversified our product offerings and regulatory profile through our investment in Katapult and our acquisitions of Flexiti in March 2021 and Heights in December 2021. As of December 31, 2021, on a fully diluted basis, assuming full pay-out of earn-out shares, we held an approximately 25.2% ownership stake in Katapult, an e-commerce focused, FinTech company offering an innovative lease financing solution to consumers and enabling essential transactions at the merchant POS. See "—Katapult Investment" below for additional details. On March 10, 2021, we acquired Flexiti, an emerging growth Canadian POS/BNPL provider, which provided us instant capability and scale opportunity in Canada's credit card and POS financing markets. On December 27, 2021, we acquired Heights, a consumer finance company that provides Installment loans and offers customary opt-in insurance and other financial products in the U.S. The acquisition of Heights accelerated our strategic transition in the U.S. toward longer term, higher balance and lower credit risk products, and provided us with access to a larger addressable market while mitigating regulatory risk. See "—Flexiti Acquisition" and "—Heights Acquisition" below and Note 15, "Acquisitions" of Item 8, "Financial Statements and Supplementary Data" for additional details. These acquisitions have enabled us to offer products to a full spectrum of customers ranging from nonprime, generally served by our legacy brands, to near prime and prime as a result of our acquisitions of Heights and Flexiti, respectively. Collectively, these strategic investments and partnerships help serve our current core customers, allow us to access new markets and customers, and reduce our regulatory and credit risk.

Our direct lending operations include a broad range of direct-to-consumer finance products focusing on Revolving LOC and Installment loans. Through our investment in Katapult and acquisition of Flexiti, we offer POS financing options for consumers. We also provide a number of ancillary financial products such as optional credit protection insurance, demand deposit accounts, proprietary general-purpose credit cards, check cashing, retail installment sales and money transfer services.

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We believe that our core products allow us to serve a broader group of consumers than our competitors. Our ability to tailor our core products to fit consumer needs coupled with the flexibility of our products, particularly our Revolving LOC and Installment products, allows us to continue serving customers as their credit needs evolve and mature. Our broad product suite creates a diversified revenue stream and our omni-channel platform seamlessly delivers our core products across all contact points – we refer to it as “Call, Click or Come In.” We believe these complementary channels drive brand awareness, increase approval rates, lower customer acquisition costs and improve customer satisfaction levels and customer retention.

2021 Recent Developments

Heights Acquisition

On December 27, 2021, we completed the acquisition of Heights for $360.0 million, consisting of $335.0 million in cash and $25.0 million of our common stock in accordance with the formula set forth in the Purchase Agreement. Heights is a consumer finance company that provides Installment loans and offers customary opt-in insurance and other financial products across 390 branches and 11 U.S. states. Heights provides Secured and Unsecured Installment loans to near-prime and non-prime consumers.

In connection with its lending operations, Heights offers optional insurance products, including credit life, credit accident and health, credit property insurance and credit involuntary unemployment insurance. These policies are written by unaffiliated third-party insurance companies. The type and terms of our optional insurance products vary from state to state based on applicable laws and regulations. Insurance premiums are remitted to unaffiliated insurance companies that issue the policies to the customer.

The acquisition of Heights accelerates our strategic migration into longer term, higher balance and lower credit risk products, allows us to expand our addressable market while mitigating regulatory risk, and diversifies our revenue, product and geography mix. Below are other key benefits of the Heights acquisition:

–Accelerates our post-pandemic U.S. earnings growth while enhancing cross-sell opportunities for non-prime credit card and other products.

–Provides us an up-market product that allows us to serve the full spectrum of near-prime and non-prime consumers.

–Adds over 3.4 million customers to our database.

–Diversifies products, revenue, customers and geographic mix in the U.S. and enables further geographic expansion.

–Strong synergy potential, including leveraging our existing omni-channel and digital capabilities across the Heights footprint.

The acquisition brought with it a leadership team that possesses deep industry experience and a strong performance track record. We believe there is strong synergy potential through combined branch optimization and cost efficiencies as well as cross-selling opportunities. As of December 31, 2021, Heights accounted for approximately $472 million of Gross loans receivable on the Consolidated Balance Sheet and is included within the U.S. segment operations.

In connection with the Heights acquisition, we also completed the issuance of $250.0 million in aggregate principal amount of 7.50% Senior Secured Notes, as described further below. The additional issuance was used to fund the Heights acquisition, together with cash on hand and shares of our common stock.

Flexiti Acquisition and Growth

On March 10, 2021, we completed the acquisition of Flexiti in a transaction that included cash at closing of $86.5 million and contingent cash consideration of up to $32.8 million based on the achievement of revenue less NCOs and loan origination targets on the acquisition's first and second anniversaries. The Flexiti acquisition provides us capability and scale opportunity in Canada’s credit card and POS financing markets. It enhances our long-term growth and financial and risk profiles, and allows us to access the full spectrum of Canadian consumers by adding an established private label credit card platform and POS financing capabilities. We now reach consumers in Canada through all the ways they generally access credit, directly both in-store and online, via credit cards or at the POS.

Flexiti is one of Canada's fastest-growing POS lenders, offering the customers of its retail partners a variety of promotional financing offers which feature 0% interest financing during the promotional period on big-ticket purchases such as furniture, appliances, jewelry and electronics. Flexiti generates revenue through a merchant discount fee charged to its merchant partners

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at the time of loan originations, interest charged on loans after the completion of the promotional financing period, various fees and through the sale of creditor insurance. Through its award-winning BNPL platform, customers can be approved instantly to shop with their FlexitiCard®, which they can use online or in-store to make multiple purchases, within their credit limit, without needing to reapply. Accepted at nearly 7,500 locations and ecommerce sites across Canada including The Brick, Leon's, Staples, Sleep Country, Wayfair, Birks and Peoples Jewelers, Flexiti is The Flexible Way to Pay™ aiming to bring flexible payment solutions to all.

The acquisition of Flexiti provides us a high-growth engine and diversifies our revenue and channel mix by product and geography. CURO's resulting platform accesses the full spectrum of Canadian consumers by adding an established omni-channel private label credit card platform and POS financing capabilities to our existing direct-to-consumer loan offerings. Flexiti primarily serves prime consumers; thus the combination presents significant revenue and earnings growth opportunities by using our expertise to expand Flexiti’s non-prime product offerings. The acquisition also provides the opportunity to leverage our loan servicing experience to improve Flexiti’s profit margins. In connection with the acquisition, Flexiti refinanced and expanded its non-recourse asset-backed warehouse financing facility from C$380 million to C$500 million.

Subsequent to the acquisition, Flexiti continued its rapid growth and gained new merchant partners throughout 2021, the most notable being LFL, Canada's largest home furnishings retailer. Effective July 1, 2021, Flexiti commenced a 10-year agreement to become LFL's exclusive POS financing partner. LFL operates over 300 stores in Canada under multiple banners, including Leon's and The Brick. Flexiti estimates that the LFL POS relationship will generate over C$800 million in annualized loan originations beginning mid-2022, when fully onboarded. Given the signing and onboarding of LFL, as well as other top-tier Canadian merchants, year over year, Flexiti's 2021 originations increased 143.2%, or C$418.6 million, to C$710.9 million.

Katapult Investment

In 2017, we made our first investment in Katapult, an e-commerce focused FinTech company offering an innovative lease financing solution to consumers and enabling essential transactions at the merchant POS. Katapult provides the retailers' customers with payment options in store or via the Katapult link on a retailer's website. In June 2021, Katapult merged with FinServ, resulting in a new publicly traded company (NASDAQ: KPLT). As a result, in June 2021 we received cash of $146.9 million and 18.9 million shares of common stock of Katapult. Additionally, we received 3.0 million of earn-out warrants, which will vest if certain share price levels are met and expire six years from the closing of the merger. In the fourth quarter of 2021, we acquired an additional 2.6 million shares of common stock of Katapult for an aggregate purchase price of $10.0 million. Our fully diluted ownership of Katapult as of December 31, 2021 was 25.2%, which assumes full pay-out of earn-out shares.

7.50% Senior Secured Notes

On July 30, 2021, we issued $750.0 million of 7.50% Senior Secured Notes, due 2028. Interest on the notes is payable semiannually, in arrears, on February 1 and August 1, beginning February 1, 2022. The net proceeds from the sale of the notes were used (i) to redeem our outstanding $690.0 million, 8.25% Senior Secured Notes due 2025, (ii) to pay fees, expenses, premiums and accrued interest in connection therewith and (iii) for general corporate purposes. On December 3, 2021, we issued an additional $250.0 million of 7.50% Senior Secured Notes to, in part, fund the acquisition of Heights on December 27, 2021.

Store Closures

On July 13, 2021, we announced the closure of 49 U.S. stores in response to evolving customer channel preferences that were accelerated by the impacts of COVID-19. The store closures, which occurred during the second and third quarters of 2021, represented nearly 25% of our U.S. stores at that time and, other than Illinois, represented strategic consolidation of locations in dense local markets. The impacted locations generated 8% of our U.S. store revenue in 2020. Our omni-channel platform allows customers to seamlessly transition online, to an adjacent store, or to contact centers, helping to increase the likelihood of retaining a large percentage of customers that had utilized the impacted stores.

The 49 U.S. stores were in Illinois (8), Oregon (2), Colorado (2), Washington (1) Texas (31), California (2), Louisiana (1), Nevada (1) and Tennessee (1). We exited Illinois entirely during the second and third quarters of 2021 given that state's legislative changes that effectively eliminated our product offerings; however, subsequent to the Heights acquisition on December 27, 2021, we retain 26 stores in Illinois under the Heights brand. The store closure decisions in other states were made after extensive analysis and in response to ongoing migration of customer transactions toward the online channel and the impact of COVID-19 on store traffic and profitability. Of the 49 stores affected, 19 and 30 were closed in the second and third quarter of 2021, respectively.

The store closure decisions followed an extensive evaluation that considered (i) comprehensive store-level score cards, (ii) market-level store density and the related addressable local market, (iii) the lingering and potential future COVID-19 impacts on

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store volume, traffic and profitability and (iv) continued migration of customer transactions toward the online channel. Of the 31 stores closed in Texas, 25 were from The Money Box acquisition in 2012. While historically successful, these stores did not have the high-profile, high-traffic advantages of our Speedy/Rapid Cash stores, thus their profitability declined more during COVID-19. As of December 31, 2021, we operated 550 stores in the U.S., including 390 acquired with Heights, and 201 stores in Canada.

COVID-19 Update

The outbreak of COVID-19 in the first quarter of 2020 contributed to significant volatility and uncertainty in markets and the global economy. From the second quarter of 2020 through the first half of 2021, relative to pre-pandemic norms, our U.S. and Canada Direct Lending segments experienced lower customer demand, better credit performance, increased or accelerated repayments and favorable payment trends as customers were aided by government stimulus programs while periodically enduring pandemic lockdowns. In the third and fourth quarters of 2021, despite the rise of the COVID-19 Delta and Omicron variants, our markets were less affected by COVID-19 Impacts, resulting in positive growth trends in revenue and receivables. Refer to Note 2, "Loans Receivable and Revenue" for a description of the general impact on our customers, our accounting related to loans impacted by COVID-19, the U.S. and Canadian government responses to the COVID-19 pandemic and the impact on our Consolidated Financial Statements.

Although most of the initial governmental restrictions imposed at the onset of the pandemic in the U.S. and Canada had been relaxed or lifted as a result of the distribution of vaccines, due to recent surges in COVID-19 cases related to the Delta and Omicron variants, some jurisdictions have reinstituted measures and restrictions to slow the transmission and mitigate public health risks.

Throughout the COVID-19 pandemic, we have remained focused on protecting the health and well-being of our employees, customers, and the communities in which we operate, while assuring the continuity of our business operations. We are considered an essential financial service and our stores have remained open to facilitate the needs of our customers during local government lock down orders. While resurgences of the pandemic have occurred and could continue to occur in both the U.S. and Canadian jurisdictions, with local governmental bodies issuing guidelines on reopening procedures depending on the severity and/or duration of resurgences, we have established processes and procedures during the crisis to help ensure that we can continue to operate safely for both our employees and customers.

To better serve our customers as they faced unprecedented economic challenges and uncertainties during the COVID-19 pandemic, we established an enhanced Customer Care Program in 2020. The program enables our team members to provide relief to customers in various ways, ranging from due date extensions, interest or fee forgiveness, payment waivers or extended payment plans, depending on a customer’s individual circumstances. As of December 31, 2021, we had granted concessions on more than 82,000 loans, or 15% of our active loans, and waived over $5.8 million in payments and fees. While relief under this program continued to be available to customers through December 2021, utilization of these benefits had slowed to insignificant levels.

Despite the prolonged uncertainty and volatility attributed to COVID-19, we have proactively taken steps to sustain and grow our business. In 2021, this included making strategic acquisitions of companies to diversify our product and geographic mix (Heights and Flexiti), making similar prudent investments in Katapult, in which we own a 25.2% share, and maintaining a low cost of debt capital (7.50% Senior Secured Notes), all discussed in more detail above.

Regulatory Developments

See "—Regulatory Environment and Compliance" for a description of the regulatory environment in which we operate in the U.S. and Canada and related 2021 developments.

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Our Products and Services

We operate our business under three segments: US, Canada Direct Lending and Canada POS Lending. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information on our operating segments.

Overview of Loan Product Revenue

The following charts depict the revenue contribution, including CSO fees, of the products and services that we currently offer:

Our direct lending operations include a broad range of direct-to-consumer finance products focusing on Revolving LOC, Installment loans and Ancillary products. The December 2021 acquisition of Heights enables us to expand the geographic reach of our Installment products in the U.S. Through our continued investment in Katapult and the acquisition of Flexiti in March 2021, we have diversified our products, now allowing us to offer POS financing options for consumers in the U.S. and Canada. We also provide a number of ancillary financial products such as optional credit protection, demand deposit accounts, proprietary general-purpose credit cards, check cashing and money transfer services. We have tailored our products to fit our customers’ particular needs as they access and build credit. Our products are licensed and governed by enabling federal and state legislation in the U.S. and federal and provincial regulations in Canada. For additional details and information regarding recent regulatory developments, see "—Regulatory Environment and Compliance" below.

Revolving LOC Loans

Revolving LOC loans, which are lines of credit without a specified maturity date, include our POS financing subsequent to our acquisition of Flexiti, which is included in our Canada POS Lending segment and allows us to offer BNPL products as well as Flexiti branded credit cards at merchant locations. Customers in good standing may draw against their line of credit, repay with minimum, partial or full payment and redraw as needed. We earn interest on the outstanding loan balances. Customers may prepay without penalty or fees. Typically, customers do not initially draw the full amount of their credit limits. In late 2017, we began to expand the Revolving LOC product in both the U.S. and Canada. Then in 2018, following regulatory changes impacting certain Installment products, we significantly expanded the product in Canada and continued to do so through 2021. Canada Direct Lending Revolving LOC loans comprised 94.2%, 91.8%, and 83.4% of our total Canada Direct Lending loans as of December 31, 2021, 2020 and 2019, respectively. In terms of consolidated revenue, Revolving LOC loans comprised 36.0%, 29.4% and 21.5% of our consolidated revenue during the years ended December 31, 2021, 2020 and 2019, respectively. Subsequent to the acquisition of Flexiti on March 10, 2021, Canada POS Lending gross loans receivables increased $263.0 million, or 134.1% in 2021. For direct comparisons, originations at Flexiti for the three months ended December 31, 2021 were C$322.1 million, an increase of C$200.8 million, or 165.6%, from the prior-year period of C$121.3 million. Sequentially, Canada POS Revolving LOC gross loans receivable increased $156.8 million, or 51.9%.

Installment Loans

Installment loan products range from unsecured, short-term loans whereby a customer receives cash in exchange for a post-dated personal check or a pre-authorized debit from the customer’s bank account, to fixed-term, fully amortizing loans with a fixed payment amount due each period during the term of the loan. Certain Installment loans are secured by a clear vehicle title or security interest in the vehicle. The customer receives the benefit of immediate cash and retains possession of the vehicle while the loan is outstanding. Payments are due bi-weekly or monthly to match the customer's payroll cycle. Customers may prepay Installment loans without penalty or fees. Loans acquired in connection with the Heights acquisition in December 2021 are considered Installment loans, which are similar to those offered by our legacy U.S. segment, and can be unsecured or

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secured. Installment loans comprised 54.9%, 63.6% and 72.9% of our consolidated revenue during the years ended December 31, 2021, 2020 and 2019, respectively.

Ancillary Products

We offer consumers a number of ancillary financial products, including check cashing, demand deposit accounts (Revolve Finance), credit protection insurance and money transfer services.

•Insurance Revenue: We earn revenue from the sale of optional credit protection insurance, which is recognized ratably over the term of the loan. Credit protection insurance is available to consumers on certain Revolving LOC and Installment products. For the years ended December 31, 2021, 2020 and 2019, insurance revenues were $48.9 million, $35.6 million and $34.6 million, respectively. We expect our insurance revenue to grow in the future as a result of our acquisition of Heights in December 2021, which also offers insurance products in connection with its lending operations. These optional products include credit life, credit accident and health, credit property insurance and credit involuntary unemployment insurance with the policies written by unaffiliated third-party insurance companies.

•Revolve Finance: Revolve Finance launched during the first quarter of 2019 and provides customers with a checking account solution that combines a Visa-branded debit card, a number of technology-enabled tools and optional overdraft protection. For the year ended December 31, 2021, our customers loaded $119.8 million on over 30,000 Revolve Finance cards.

•First Phase: In late December, 2021, we launched First Phase, a new credit card program, which we have begun rolling out across the U.S. in 2022. First Phase provides non-prime customers a Visa-branded credit card and a number of technology-enabled tools.

Ancillary products comprised 9.1%, 7.0% and 5.6% of our consolidated revenue during the years ended December 31, 2021, 2020 and 2019, respectively.

CSO Programs

Through our CSO programs, we act as a CSO/CAB on behalf of customers in accordance with applicable state laws. We currently offer Installment loans with a maximum term of 180 days through CSO programs in stores and online in the state of Texas. As a CSO, we earn revenue by charging the customer a CSO fee for arranging an unrelated third party to make a loan to that customer.

We currently have relationships with two unaffiliated third-party lenders for our CSO programs. We periodically evaluate the competitive terms of these lender contracts, which could result in the transfer of volume and loan balances between lenders.

Under our CSO programs, we provide certain services to a customer in exchange for a CSO fee payable to us by the customer. One of the services is to guarantee the customer’s obligation to repay the loan. For CSO loans, each lender is responsible for providing the criteria by which the customer’s application is underwritten and, if approved, determining the amount of the customer loan. We in turn are responsible for assessing whether or not we will guarantee the loan. This guarantee represents an obligation to purchase specific loans if they go into default and is included in "Liability for losses on CSO lender-owned consumer loans" in our Consolidated Balance Sheets.

CSO fees are calculated based on the amount of the customer’s outstanding loan in compliance with applicable statute. We earn CSO fees ratably over the term of the loan as the customer makes payments. If a loan is paid off early, no additional CSO fees are due or collected. During the years ended December 31, 2021 and 2020, 58.3% and 66.5%, respectively, of loans originated under CSO programs were paid off prior to the original maturity date.

CSO loans are made by a third-party lender, and thus we do not include them in our Consolidated Balance Sheets as loans receivable; instead, we include fees receivable in “Prepaid expenses and other” in our Consolidated Balance Sheets.

Geography and Channel Mix

For the years ended December 31, 2021, 2020 and 2019, approximately 64.3%, 75.4% and 80.0%, respectively, of our consolidated revenues were generated from services provided within the U.S. and approximately 35.7%, 24.6% and 20.0%, respectively, were generated from services provided within Canada. For each of the years ended December 31, 2021 and 2020, approximately 59.9% and 60.7%, respectively, of our long-lived assets were located within the U.S., and approximately 40.1% and 39.3%, respectively, were located within Canada. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information on our geographic segments.

Stores: As of December 31, 2021, we had 751 stores across 20 U.S. states and eight provinces in Canada, which included 390 stores acquired with the acquisition of Heights in December 2021. The geographic breakdown is as follows:

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•550 U.S. locations: Texas (140), Tennessee (74), South Carolina (58), Alabama (54), California (35), Illinois (26), Missouri (24), Wisconsin (20), Georgia (18), Kentucky (18), Nevada (18), Oklahoma (18), Indiana (16), Arizona (12), Kansas (10), Louisiana (4), Mississippi (2), Colorado (1), Oregon (1), and Washington (1), and;

•201 Canadian locations: Ontario (134), Alberta (27), British Columbia (23), Saskatchewan (6), Nova Scotia (5), Manitoba (4), Newfoundland and Labrador (1), and New Brunswick (1).

Online: We lend online in 27 states in the U.S. and eight provinces and one territory in Canada. For the years ended December 31, 2021, 2020 and 2019, revenue generated through our online channel represented 48%, 49% and 46%, respectively, of consolidated revenue.

Retail: We offer POS Lending in Canada at nearly 7,500 retail locations and over 3,100 merchant partners across 10 provinces and two territories.

Industry Overview

Through December 31, 2021, we operated in a segment of the financial services industry that provides lending products to non-prime and near-prime consumers in need of convenient and flexible access to credit and other financial products. In the U.S. alone, according to a 2021 study by the Financial Health Network, despite the increase in programs designed to waive certain fees and interest to those impacted by COVID-19, underserved consumers in our target market spent an estimated $255 billion in fees and interest in 2020 related to credit products similar to those we offer.

We believe our target consumers have a need for tailored financing products to cover essential expenses and episodic cash shortfalls. In 2020, as the COVID-19 pandemic began to impact much of the global economy, lower-income consumers in the U.S. continued to increase their spending despite being impacted the most of any income group by job losses. According to an October 2020 JPMorgan Chase Institute study, spending by the unemployed increased by 22% upon receipt of unemployment, which included additional stimulus payments by the U.S. government, and then declined 14% after the expiration of the stimulus.

During times of economic volatility, our target consumers periodically exhibit higher income volatility and require access to additional financing products. A study published in 2021 by JPMorgan Chase estimated that households with lower incomes needed approximately seven weeks of take-home income to cover a simultaneous income dip and expense spike, which translates to a $2,500 cash buffer. However, most of the households in the study had approximately $600, prior to the pandemic. We believe we can meet the needs of consumers, including during periods of economic volatility, through the thoughtful and responsible use of our proprietary credit decisioning model.

In catering to these customers, we compete against a large number and wide variety of consumer finance providers, including online and branch-based consumer lenders, credit card companies, pawn shops, rent-to-own and other financial institutions that offer similar financial products or services. The Financial Health Network noted in its 2021 study that the short-term credit, compound annual growth rate from 2015 to 2018 in the U.S. for installment loans and loans originated by non-bank lenders, primarily through online channels, was 13.8% and 27.3%, respectively.

As discussed further in "—Regulatory Environment and Compliance," our industry is highly regulated at the federal, state and local levels in the U.S. and at the federal and provincial levels in Canada. In general, these regulations are designed to protect our consumers and the public, in addition to regulating our business operations. We believe our (i) experienced management team, (ii) proprietary industry technology, (iii) ability to successfully navigate previous regulatory changes, and (iv) flexibility to tailor our products or create new products to meet existing or new regulation will allow us to successfully manage future challenges and obstacles.

In addition to the broad trends impacting the consumer finance landscape, we believe we are well positioned to grow our market share as a result of several changes related to consumer preferences within our industry. Enhanced by the impacts of COVID-19 during 2020 and 2021, we believe that evolving consumer preferences, including increased use of mobile devices and overall adoption rates for technology are driving significant change in our industry that benefits CURO.

•Increasing adoption of online channels—Our experience, particularly in 2020 and 2021 as COVID-19 forced a shift in consumer behavior to transact from home, is that customers prefer service across multiple channels or touch points. For the year ended December 31, 2021, our revenue generated through online channels in the U.S. and Canada Direct Lending represented 50.3% of our total U.S. and Canada Direct Lending revenues compared to 48.5% for the year ended December 31, 2020. Canada Direct Lending online revenue as a percentage of total Canada Direct Lending revenue increased 24.6% year over year.

•Increasing adoption of mobile devices—With the proliferation of improved smartphone service plans, many of our non-prime customers have moved to mobile devices for loan origination and servicing. According to a 2021 study by the Pew Research Center covering the U.S., smartphone penetration among adults was 85%, up from 81% two years

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earlier. In Canada, the penetration rate for smartphones was 66% in 2019, the last time Pew Research Center did the study there. Additionally, according to Statista, the smartphone penetration rate in the U.S., when compared to the total population, increased from 20.2% in 2010 to 72.2% in 2020, while in Canada, they project an increase in smartphone users of over 3 million people, or 10%, between 2018 and 2024. In 2012, less than 44% of our U.S. customers communicated with us via a mobile device, whereas in the fourth quarter of 2021, that percentage had grown to nearly 78%. The December 2021 acquisition of Heights provides us the opportunity to expand our online channel to a historically in-store based business model. Flexiti, with its retail merchant partnership, predominantly originates loans at merchants physical locations.

•Shifting preference toward longer term, higher balance loans—Given our experience since 2008 in offering short- and longer-term loan products, we believe that short term, small balance loans, which we refer to as Single-Pay loans and which are included in our Installment portfolio, are becoming less popular or less suitable for a growing portion of our customers. Our customers generally have shown a preference for our Unsecured and Secured Installment loan products and Revolving LOC loan products, which typically have longer terms, lower periodic payments and a lower relative cost than Single-Pay products. Offering more flexible terms and lower payment amounts also significantly expands our addressable market by broadening our products’ appeal to a larger proportion of consumers. For example, our Single-Pay loans for U.S., excluding Heights, and Canada Direct Lending represented 27.4% and 97.2%, respectively, of total Company Owned gross loans receivable at the beginning of 2015, compared to 12.4% and 4.4%, respectively, at December 31, 2021.

Our Strengths

We believe the following foundational competitive strengths differentiate us from our competitors:

•Differentiated, omni-channel platform—We believe we have the only fully-integrated store, online, mobile and contact center platform to support omni-channel customer engagement for non-prime and near-prime customers in the U.S. and Canada. We offer a seamless “Call, Click or Come In” capability for customers to apply for loans, receive loan proceeds, make loan payments and otherwise manage their accounts, whether in store, online or over the phone. We believe the strength of our online platform during the COVID-19 pandemic in 2020 and 2021 was advantageous as customers could easily utilize the channel during periods of peak pandemic outbreaks or resurgences. Our online customer transactions increased significantly relative to all types of transactions, which resulted in a similar increase in revenue from online transactions, relative to total revenue. Our customers can utilize any of our three channels at any time and in any combination to obtain a loan, make a loan payment or manage their accounts. In addition, we have our “Site-to-Store” capability, for which customers that do not qualify for a loan online are directed to a store to complete a loan transaction. Our "Site-to-Store" program resulted in approximately 120,000 loans in the year ended December 31, 2021. These aspects of our platform enable us to source a larger number of customers, serve a broad range of customers and continue serving these customers for long periods of time.

•Recession-resilient business—In addition to channel diversification, we believe our business is adaptable to various economic cycles. Our customers require essential financial services and value timely, transparent, affordable and convenient alternatives to banks, credit card companies and other traditional financial services companies, which are not generally available to them. Changes to our products or processes are at times needed to suit the specifics of a particular economic downturn, such as the Customer Care Program we instituted in 2020 in response to the impact COVID-19 had on our customers. Our customers have historically shown a greater ability to manage credit throughout economic downturns compared to prime customers, as measured by the relative change in their delinquency and charge-off data during economic downturns. During 2020, as a result of various COVID-19 impacts such as cautious customer behavior, government stimulus programs, and our tightening of credit, demand for our products decreased relative to pre-COVID-19 levels while credit losses and delinquencies remained well below historical levels. Sequential growth in the last two quarters of 2020 outpaced the comparable quarters in 2019 as the outsized impacts of stimulus programs in the U.S. and Canada phased out.

•Compelling new products expand growth opportunities—We continue to maintain our current customer relationships and attract new customers through our consistently innovative approach to new products. In February 2019, we launched Revolve Finance, a checking account solution, with FDIC-insured deposits, that combines a Visa-branded debit card, a number of technology-enabled tools and optional overdraft protection. Meanwhile in December 2021, we launched First Phase, a new credit card program, which we will begin rolling out across the U.S. in 2022. First Phase will provide our non-prime customers with a Visa-branded credit card and a number of technology-enabled tools.

As we look to enhance our product portfolio, we acquired two strategically important companies in 2021: Flexiti in March 2021 and Heights in December 2021. Flexiti's POS and BNPL products are new offerings in our portfolio within a rapid-growth segment of the Canadian market. Heights is a provider of lower cost credit to near-prime consumers that both expands our offerings and allows us cross-sell opportunities between CURO's legacy U.S. customers and Heights' consumers.

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•Experienced management and flexible platform—We believe our management team is among the most experienced in the industry, with over a century of collective experience. Importantly, our management team has experience through various economic cycles, which we have leveraged during the COVID-19 pandemic. We also have deep personnel strength across key functional areas including compliance, IT, credit decisioning, marketing, legal and finance. Our leadership experience has allowed us the ability to transition quickly to changes in regulatory environment, economic cycles and customer preferences, as we did with our (i) successful transition to lower cost revolving LOC products in Canada starting in 2018 and (ii) our ability to deploy capital efficiently as we did in relation to our investment in Katapult, allowing us to benefit with a significant return in 2021, and our acquisition of Flexiti and Heights. The acquisition of both companies brought on board their own sets of experienced management leadership, as evidenced, for example, by Flexiti's loan growth since its acquisition.

•Proprietary credit decisioning model—Curo is our legacy leading analytics and information technology tool, which drives strong credit risk management. Curo is a bespoke, proprietary IT platform that seamlessly integrates activities related to customer acquisition, underwriting, scoring, servicing, collections, compliance and reporting. Our analytics team utilizes Curo to gather data and performance records for research and development purposes to assist in our continued development of new models. Curo is underpinned with 20 years of continually updated customer data proven profitable across credit cycles and comprising over 100 million loan records (as of December 31, 2021) used to formulate our robust, proprietary underwriting algorithms. This platform then automatically applies multi-algorithmic analysis to a customer’s loan application to produce a “Curo Score” which drives our underwriting decision. This fully integrated IT platform enables us to make real-time, data-driven changes to our customer acquisition and risk models, which yield significant benefits in terms of customer acquisition costs and credit performance. The acquisition in March 2021 of Flexiti provided us access to an award-winning BNPL platform and proprietary technology to add to Curo. Flexiti's technology platform is recognized as market leading, winning ACT (Advanced Card Technologies) Canada's 2015 Technology Innovation Award for Payments Benefiting Merchants

•Sophisticated customer analytics—Our analytic tools and multi-faceted marketing strategy drive low customer acquisition costs. Our marketing strategy includes a combination of strategic direct mail, television advertisements and online and mobile-based digital campaigns, as well as strategic partnerships. Our Marketing, Risk and Credit Analytics team uses Curo to cross reference marketing spend, new customer account data and granular credit metrics to optimize our marketing budget across these channels in real time and to produce higher quality new loans. In addition to these diversified marketing programs, our stores play a critical role in creating brand awareness and driving new customer acquisition.

•Attractive and stable markets—We have increased our diversification by product (such as Canada POS Lending) and geography (such as Revolving LOC at Canada Direct Lending), allowing us to serve a broader range of customers with a flexible product offering. As part of this effort, we have also developed and launched new brands and will continue to develop new brands with differentiated marketing messages. These initiatives have helped diversify our revenue streams by enabling us to appeal to a wider array of borrowers. In addition to product and geographic diversification, we acquired Ad Astra in January 2020, which was previously our exclusive provider of third-party collection services for the U.S. business. The acquisition brought all U.S. servicing and recovery in-house, drives operational and financial synergies to ensure all aspects of the recovery portfolio are coordinated, reduces operational redundancy and increases peak volume management, improves compliance synergies, and facilitates integrated and personalized credit risk management strategies and campaign management across the servicing and recovery lifecycle.

In addition to the strengths above, we believe the following core competencies are essential to succeed in this industry:

•Focus on customer experience—We focus on customer service and experience and have designed our stores, website and mobile application interfaces to appeal to our customers’ needs. We continue to augment our web and mobile app interfaces to enhance our “Call, Click or Come In” strategy, with a focus on adding functionality across all our channels. We invest considerable time and resources on web design and mobile optimization to ensure our websites are quick and responsive, and support the mobile phone brands and sizes that our customers use. Our stores are branded with distinct and recognizable signage, are conveniently located and typically are open seven days a week. At Flexiti, we offer flexible financing solutions for retailers in-store and on-line, allowing customers to immediately finance their purchases with various promotional financing offers with 0% interest within their credit limit. Furthermore, our U.S. and Canada Direct Lending business employs highly experienced store managers, which we believe are critical elements of driving customer retention while lowering acquisition costs and maximizing store-level margins. As of December 31, 2021, the average tenure of our U.S. and Canada Direct Lending store managers, district managers and regional directors was approximately 10 years, 14 years and 16 years, respectively.

•Strong compliance culture with centralized collection operations—We consistently engage in proactive and constructive dialogue with regulators in each of our jurisdictions and have made significant investments in best-practice automated tools for monitoring, training and compliance management systems, which are integrated into Curo. In addition to conducting semi-annual compliance audits, our in-house centralized collections strategy, supported by our proprietary back-end customer database and analytics team, drives an effective, compliant and highly scalable model.

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•Demonstrated access to capital markets and diversified funding sources—We have raised over $3.9 billion of debt financing across 15 separate offerings and various credit facilities since 2010, most recently in December 2021. This aggregate amount includes $1.0 billion of 7.50% Senior Secured Notes, three separate Canada revolving facilities to support the growth of Revolving LOC products in Canada Direct Lending and Canada POS Lending, and a $200 million U.S. revolving facility. We acquired a $350.0 million revolving facility concurrent with the acquisition of Heights on December 27, 2021. We also have U.S. and Canadian bank revolving credit facilities to supplement intra-period liquidity. We believe our access to the capital markets and diversified funding sources is an important significant differentiator, as certain competitors may have trouble accessing capital to fund their business models if credit markets tighten. For more information, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

•History of growth and profitability—Throughout our operating history we have had strong profitability and growth. Between 2010 and 2021 we grew revenue, Adjusted EBITDA and Adjusted Net Income at a compound annual growth rate of 13.5%, 11.9% and 5.8%, respectively. For more information on non-GAAP measures, see Item 7. "Managements Discussion and Analysis of Financial Condition and Results of Operations—Supplemental Non-GAAP Financial Information." At the same time, we have significantly expanded our product offerings to better serve our growing and expanding customer base.

•Continuation of return of stockholders' capital—From 2019 through 2021, we initiated share repurchase programs and cash dividends to provide our stockholders with a return of capital. In 2019 and leading up to the onset of COVID-19 in early 2020, we maintained share repurchase programs resulting in over $50 million of shares bought back and held in treasury. We re-initiated a share repurchase program in 2021, resulting in over $37.4 million of shares bought back and held in treasury. In 2020, we instituted an annual $0.22 per share dividend, paid quarterly, which we renewed in 2021 and increased to $0.44 per share annually beginning in the second quarter of 2021.

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Growth Strategy

We believe our diversification through brands, products and geography positions us well for long-term growth. Our recent investments in Canada, Heights, Katapult and card products allows us to be a full-spectrum lender to meet our target customers' evolving credit demands.

•Full Spectrum Lending—In addition to growing our existing suite of loan products, we are focused on expanding the total number of customers that we serve through product, geographic and channel expansion. These efforts include expansion of our online channel, which proved helpful to our customers during the COVID-19 pandemic in 2020 and 2021. However, we continue to invest in and introduce additional products to address our customers’ preference for longer-term products that allow for greater flexibility in managing their monthly payments.

Canada POS Lending card products offers compelling new growth opportunities

In March 2021, we acquired Flexiti, an emerging growth Canadian POS / BNPL provider. Flexiti is a growing FinTech company that provides POS financing and BNPL capabilities through an omni-channel platform to Canadian retailers. This acquisition positions us as a full-credit-spectrum lender in Canada and enhances our long-term growth trajectory, diversifies our revenue mix by product and geography and helps to mitigate regulatory risk given Canada's historically stable regulatory environment. We now reach consumers in Canada through all the ways in which they access credit directly both in-store and online by credit cards or at the POS. The addition of Flexiti is an important milestone for our continued value creation and positions CURO as a top three non-bank lender in Canada.

Canada Direct Lending contributing to future growth

Our investment in our Revolving LOC product in Canada has been successful and provides an avenue for long-term growth. We expanded Revolving LOC loan products under our LendDirect brand to include additional provinces and increased customer acquisition efforts in existing markets. We also accelerated our offering of Revolving LOC products under our Canadian CashMoney brand. In late 2017 and 2018, we launched Revolving LOC loans in Alberta and Ontario, respectively, with a significant increase in mid-2018 following regulatory changes impacting other products. In

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2019, we began offering Revolving LOC loans in British Columbia. Although our revenue in Canada was negatively impacted by COVID-19 in 2020, our Revolving LOC product there continued to generate strong revenue and loan growth through 2021. Canada Direct Lending Revolving LOC loans grew 32.7% year over year. Based on market trends, we estimate that the consumer credit opportunity for installment balances is approximately C$175 billion. We also believe these customers comprised a highly fragmented market with low penetration by our industry and thus represents a growth opportunity for us.

We believe the historic stability in Canada's regulatory environment, historical performance by Canadian customers, and the continued demand by customers for a long-term and flexible product provide a growth opportunity over a longer horizon while diversifying (i) geographically, (ii) through product expansion, and (iii) through customer risk profiles, as well as helping to mitigate regulatory risk.

Heights acquisition

The December 2021 acquisition of Heights enables us to offer new near-prime credit offerings in states that we historically have not had a presence. The acquisition will allow us to expand our already robust omni-channel offerings, expand digital marketing, enhance credit decisioning, and diversify the payment options we can offer to our customers. Importantly, we have the ability to offer our non-prime credit cards to eligible customers initial pursuing a product through Heights. The aggregate purchase price for Heights was $360 million, comprised of $335 million in cash and $25 million in common stock.

Katapult Investment

In addition to our core direct-to-customer products, we made our first investment in Katapult in 2017. At the time of our initial investment, we identified multiple catalysts for Katapult's future success–an innovative e-commerce POS business model, a focus on the vast and under-penetrated non-prime financing market, and a clear and compelling value proposition for merchants and consumers. We believe Katapult's total estimated addressable market in the U.S. is between $40-$50 billion, of which Katapult currently holds less than one percent. We believe Katapult is poised to cater to this near-term demand growth. Katapult’s sophisticated end-to-end technology platform provides consumers a seamless integration with online, brick and mortar and omni-channel merchants, giving the consumer an exceptional purchasing experience. Based on a June 2021 Experian report, nearly a third of U.S. consumers are considered non-prime. In June 2021, we received cash of $146.9 million and additional stock as a result of a merger between Katapult and FinServ. To date, our cumulative cash investment in Katapult is $37.5 million and, with the latest investment made in December 2021 of $10.0 million. We own approximately 25.2% of Katapult on a fully diluted basis assuming full pay-out of earn-out shares.

Investments in our processes and technology

•Continue to improve the customer journey and experience—We continuously seek to enhance our “Call, Click or Come In” customer experience and execution, with projects ranging from continuous upgrades of our web and mobile app interfaces to enhanced service features to payment optimization.

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Increased focus on online channels—As COVID-19 has demonstrated, our investments in online channels have proven to be a significant revenue driver. The pandemic enhanced customer transaction volume shift online, accelerating trends we previously observed. While customers may return to stores as the pandemic eases, we expect online channel usage will expand over time.

•Continue to focus on our core capabilities—We believe that our ability to continue to be successful in developing and managing new products is based upon our capabilities in three key areas:

•Loan Underwriting: Installment and Revolving LOC products are more affordable and useable for customers but require increasingly sophisticated underwriting and decisioning to optimize customer acquisition cost while balancing credit risk with approval rates. Our analytics platform combines data from over 100 million records (as of December 31, 2021), supplemented with predictive data from third-party reporting agencies.

•Collections and Customer Service: Installment and Revolving LOC products have longer terms than Single-Pay loans. Longer duration drives the need for a more comprehensive collection and a credit-default servicing strategy that emphasizes curing a default and returning the customer to good standing. We utilize a centralized collection model that eliminates the need for our store personnel to contact customers to resolve a delinquency. We have also invested in building new contact centers in the U.S. and Canada, each of which utilizes sophisticated dialer technologies to help us contact our customers in a scalable, efficient manner. To streamline our collection solutions, in January 2020 we purchased Ad Astra, which was previously our exclusive provider of third-party collection services for owned and managed loans in the U.S that are in later-stage delinquency. The acquisition provided significant operational, financial and compliance synergies.

•Funding: The shift to larger balance loans with extended terms requires more substantial and more diversified funding sources. Given our deep and successful track record in accessing diverse sources of capital, we believe that we are well-positioned to support future new product transitions.

•Continue to bolster our core business through enhancement of our proprietary risk scoring models—We continuously refine and update our credit models to drive additional improvements in our performance metrics. Regularly updating our credit underwriting algorithms enables us to enhance the value of each customer relationship through improved credit performance. We believe that combining these underwriting improvements with data-driven marketing spend will produce margin expansion and earnings growth.

•Monitor and appropriately increase approval rates to our applicants—Growth and optimization of customer acquisition spending depends on maintaining high approval rates balanced with credit risk management. We continually improve our scoring models to optimize a profitable balance of application approval rates and portfolio performance. We balance growth with our credit risk management in all economic cycles and are mindful as to when and how to tighten our credit approval process, such as our tightening during the COVID-19 pandemic.

•Expand credit for our borrowers—Through extensive testing and proprietary underwriting, we have successfully increased credit limits for customers, enabling us to offer “the right loan to the right customer.” The favorable customer acceptance rates and credit performance have improved overall loan-vintage and portfolio performance.

•Marketing Expansion—We reach our customers using a multi-channel approach, including addressable TV, text to apply and enhanced digital ads utilizing our site-to-store concept to stay ahead of the continually developing landscape of our customers' behavior and needs. These approaches are incorporated into our core marketing and sponsorships through certain major events, such as NASCAR auto racing, to expand our brand awareness.

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Customers

Our U.S. and Canada Direct Lending customers require essential financial services and value timely, transparent, affordable and convenient alternatives to banks, credit card companies and other traditional financial services companies, which are not generally available to them. In the U.S., prior to our acquisition of Heights, our customers generally earned between $15,000 and $85,000 annually. Heights' customers typically earn an average of $10,000 to $12,000 per year more than the average CURO customer. Our Canada Direct Lending customers generally earn between C$15,000 and C$75,000 annually while the average annual earnings of Canada Point of Sale customers is approximately C$100,000. Based on our experience, our target consumer utilizes the products provided by our industry for a variety of reasons, including that they often:

•have immediate need for cash between paychecks;

•have been rejected for traditional banking services;

•maintain insufficient account balances to make a bank account economically efficient;

•prefer and trust the simplicity, transparency and convenience of our products;

•need access to financial services outside of normal banking hours; or

•eschew complicated fee structures in some bank products (e.g., credit cards and overdrafts).

At Canada POS Lending, our consumers are looking for flexible payment solutions at the time of purchase, primarily at retail locations. The Flexiti card offers deferred payment solutions, for up to 24 months at 0% interest during the promotional period, monthly installment payment solutions of up to 72 months also at 0% interest during the promotional period provided that scheduled payments are made, or a revolving credit experience like a typical credit card. The fully automated application process typically results in a credit decision within three minutes with Flexiti branded credit cards available to use at nearly 7,500 partner retail locations.

Marketing

Our legacy U.S. and Canada Direct Lending businesses use a multi-channel approach to attract new customers, with a variety of targeted and direct response strategies to build brand awareness and drive customer traffic in stores, online and to our contact centers. These strategies include direct-response spot television, radio campaigns, point-of-purchase materials, multi-listing and directory program for print and online yellow pages, local store marketing activities, prescreen direct mail campaigns, robust online marketing strategies and “send a friend” and word-of-mouth referrals from satisfied customers. We also utilize our multi-channel approach to drive customers applying online to our store locations–a program we call “Site-to-Store.” We use similar multi-channel strategies at our Canada POS Lending segment to build awareness and drive repeat spend through marketing touchpoints. These touchpoints include media, digital advertising, POS / in-store materials, emails, direct mail and other merchant owned channels to drive overall results. Heights marketing primarily consists of direct mailings.

Information Systems

Curo is our proprietary IT platform for our U.S. and Canada Direct Lending segments and is a unified, centralized platform that seamlessly integrates activities related to customer acquisition, underwriting, scoring, servicing, collections, compliance and reporting. Curo is scalable and has been successfully implemented in the U.S. and Canada and is designed to support and monitor compliance with regulatory and other legal requirements. Our platform captures transactional history by store and by customer, which allows us to track loan originations, payments, defaults and payoffs, as well as historical collection activities on past-due accounts, all in a single data base. In addition, our stores perform automated daily cash reconciliation at each store and every bank account in the system. Curo enables us to make real-time, data-driven changes to our acquisition and risk models, which yields significant benefits in terms of customer acquisition costs and credit performance. Each of our stores and all of our customer service collections representatives have secure, real-time access to it.

Curo and its proprietary algorithms are used for every aspect of underwriting and scoring of our loan products. The customer application, approval, origination and funding processes differ by state, country and channel. For in-store loans, the customer presents required documentation, including a recent pay stub or support for underlying bank account activity for in-person verification. For online loans, application data is verified with third-party data vendors, our proprietary algorithms and/or tech-enabled account verification. Our proprietary, highly scalable scoring system employs a champion/challenger process, whereby models compete to produce the most successful customer outcomes and profitable cohorts. Our algorithms use data relevancy and machine learning techniques to identify approximately 60 variables from a universe of approximately 11,600 that are the most predictive in terms of credit outcomes. The algorithms, which are continuously reviewed and refreshed, are focused on a number of factors related to the loan applicant's disposable income, expense trends or cash flows, among other factors. The predictability of our scoring models is driven by the combination of application data, purchased third-party data and our robust internal database of over 100 million records as of December 31, 2021 associated with loan information. These variables are then analyzed using a series of algorithms to produce a "Curo Score" that allows us to optimize lending decisions in a scalable manner. From 2010 to 2021, we extended over $21.1 billion in total credit across approximately 52.5 million total loans.

For Canada POS Lending, our decision management platform and information technology tools drive strong credit risk management. Our analytics team utilizes data from customer acquisition, underwriting, servicing and collections for research

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and development purposes to assist in our continued development of new models. Flexiti’s proprietary Credit Risk Rating model is applied in real-time to every customer’s application and drives our underwriting decision. Our credit risk models combined with our scalable omnichannel instant apply-and-buy POS financing solution yield significant benefits in terms of customer acquisition costs and credit performance.

Our proprietary IT platform and Canada POS powers the entire lifecycle of customer and merchant transactions. It seamlessly integrates activities related to merchant configuration, customer acquisition, account management, collections, and reporting. Our platform allows for our suite of BNPL plans to be customized for each of our retail partners. The platform captures transactional data by retailer, store and customer. Data related to loan originations, servicing activities, collection activities, payments and defaults are also captured. The platform allows Canada POS to make data-driven decisions that optimizes performance across all aspects of the POS business.

The customer application and underwriting process can differ by province, retailer, acquisition channel and customer. Customer presented photo-identification, third-party data vendors and tech-enabled bank account verification are available for deployment in customer verification. Our underwriting models are powered by the combination of application data, purchased third-party data and our internal database of loan information.

Cybersecurity Management

We rely on information technology systems and networks in connection with many of our business activities. Many of these systems and networks are managed directly by us, while some are managed by third-party service providers and are not under our day-to-day control. However, we do have oversight of the services provided by third-party service providers. We frequently evaluate ourselves for appropriate business continuity and disaster recovery planning through the use of test scenarios and simulations. Our networks and systems are tested multiple times throughout the year by third-party security firms through penetration and vulnerability testing and our networks and systems are monitored by intrusion detection services as well as state-of-the-art network behavior analysis hardware and software. All systems have vulnerabilities mitigated through a robust patch management program that is reviewed annually. We employ a skilled IT workforce to implement our cybersecurity programs and to perform all security and compliance-related responsibilities in a timely manner. For risks associated with cybersecurity, see “Item 1A – Risk Factors.”

Collections

We operate centralized collection facilities in the U.S. and Canada in order to enable store employees to focus primarily on customer service and to improve effectiveness and compliance management. Our collections personnel contact customers after a missed payment, primarily via phone calls, letters, text, push notifications and emails, and help the customer understand available payment arrangements or alternatives to resolve the deficiency. We use a variety of collection strategies, including payment plans, settlements and adjustments to due dates. Collections teams are trained to apply different strategies and tools for the various stages of delinquency and also employ varying methodologies by product type.

We assign delinquent loan accounts in the U.S., excluding Heights, to Ad Astra typically after 91 days without a scheduled payment. We acquired Ad Astra in January 2020, and its results are included in our Consolidated Financial Statements. Under our policy, the precise number of days past-due to trigger a collection-agency referral varies by state and product, and requires, among other things, that proper notice be delivered to the customer prior to assignment. Once a loan meets the criteria set forth in the policy, it is automatically referred to Ad Astra for collection. We make changes to our policy periodically in response to various factors, including regulatory developments and market conditions. As delinquent accounts are paid, Curo updates these accounts in real time. This ensures that collection activity will cease the moment a customer’s account is brought current or paid in full and considered in “good standing.” See Note 16, “Related Party Transactions" of the Notes to Consolidated Financial Statements for a description of our relationship with Ad Astra.

At Canada POS Lending, we utilize a combination of internal and external collection agencies to collect on past due and charged off accounts. Prior to an account charging off, accounts are addressed by either our internal collection call center or external agencies. Collection agents are trained to provide exceptional customer service with the objective of getting the customer to clear any past due amounts and emphasizing the importance of making future payments on time. After an account charges off, third party collection agencies call on our behalf to arrange repayment of debt. Attempts to collect are primarily made via phone calls, but email, text messages, and letters may be used.

Competition

We believe that the primary factors upon which we compete are:

•range of services and products;

•flexibility of product offering;

•convenience;

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•reliability;

•fees;

•experienced management; and

•speed.

Our customers value service that is quick and convenient, lenders that can provide the most appropriate structure, loan terms that are fair and payments that are affordable. We face competition in all of our markets from other alternative financial services providers, banks, savings and loan institutions, short-term consumer lenders and other financial services entities. Generally, the landscape is characterized by a small number of large, national participants with a significant presence in markets across the country and a significant number of smaller localized operators. Our competitors in the alternative financial services industry include monoline operators (both public and private) specializing in short-term cash advances, multiline providers offering cash advance services in addition to check cashing and other services, and subprime specialty finance and consumer finance companies, as well as businesses conducting operations online and by phone.

For Canada POS Lending specifically, with the exit of Desjardins, we have partnered with merchants representing 77% of the retail market Desjardins served previously. In 2021 alone, we gained several new merchant partners, most notable of which was the LFL Group, one of Canada's largest retailer holding companies. We believe we have limited omnichannel competition, with new BNPL entrants focused primarily on small-ticket e-commerce transactions that do not require a credit card. We expect that our Canada POS business will become Canada's largest POS financing provider now that LFL has been onboarded. With our omni-channel financing solution, we expect continued market share gains for Canada POS Lending.

Seasonality

Our direct lending businesses in the U.S. and Canada typically experience the greatest demand during the third and fourth calendar quarters. In the U.S., this demand generally declines in the first calendar quarter as a result of federal income tax refunds and credits. Typically, our cost of revenue for loan products, which represents our provision for losses, is lowest as a percentage of revenue in the first quarter of each year due to our customers’ receipt of income tax refunds, and increases as a percentage of revenue for the remainder of the year. As a result, we experience seasonal fluctuations in our U.S. operating results and cash needs. Our lending business in Canada is less subject to seasonality than our U.S. lending business.

Our Canada POS Lending sales are largely driven by the typical seasonality experienced in the Canadian retail markets, with an average of 45% of sales historically falling in the last quarter of the year. Modest fluctuations are seen in February driven by Valentine’s Day in the jewelry category with furniture driving the majority of the seasonal impacts, driven by The Brick / Leon’s Furniture. Black Friday, in particular, has been a large driver of originations. In 2021, weekly originations in the second half of the year were nearly five times the amount experienced in the first half of the year.

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Human Capital Resources

As of December 31, 2021, we had approximately 5,200 employees, approximately 3,600 of whom work in our stores. In addition to our corporate headquarters in Wichita, Kansas, we have a FinTech office in Chicago, Illinois, which allows us to attract and retain talented IT development and data science professionals. We also have offices in Toronto, Ontario and Greenville, South Carolina servicing our Canadian segments and Heights Finance, respectively. None of our employees are unionized or covered by a collective bargaining agreement and we consider our employee relations to be good.

We believe that customer service is critical to our continued success and growth. As such, we have staffed our legacy U.S. stores, (i.e., those stores not part of the acquisition of Heights) with a full-time Store Manager, Branch Manager or Manager, who runs the day-to-day operations of the store. The Manager is typically supported by two to three Senior Assistant Managers and/or Assistant Managers and three to eight full-time Customer Advocates. Customer Advocates conduct the POS activities and greet and interact with customers from a secured area behind expansive windows. We believe staff continuity is critical to our business. We believe that our pay rates for these positions are equal to or better than our major competitors and we regularly evaluate our benefit plans to maintain their competitiveness.

We are committed to the health and safety of every person who comes into our stores. During 2020 and 2021, as a result of COVID-19, we implemented additional safety protocols to protect our frontline store employees, customers and communities, including enhanced protocols regarding social distancing and routine store cleaning. We temporarily closed a number of stores for a limited amount of time for suspected or confirmed infections, which affected our total store volume. In 2021, with the onset of new variants, we continued to maintain robust safety protocols to ensure the safety of our customers and employees. For most of our contact center and corporate support employees, a remote-work policy has been instituted and we are evaluating best practices for a hybrid home/office environment. Our experienced teams have adapted quickly to the changes and have managed our business successfully during this challenging time.

Regulatory Environment and Compliance

The financial services industry is regulated at the federal, state and local levels in the U.S. and at the federal and provincial levels in Canada. Laws and regulations governing our loan products typically impose restrictions and requirements, such as those on:

•interest rates and fees;

•maximum loan amounts;

•income requirements;

•the number of simultaneous or consecutive loans and required waiting periods between loans;

•loan extensions and refinancings;

•payment schedules (including maximum and minimum loan durations);

•required repayment plans for borrowers claiming inability to repay loans;

•disclosures;

•security for loans and payment mechanisms;

•licensing; and

•database reporting, eligibility, and loan utilization information.

We are also subject to laws and regulations relating to our other financial products, including those governing recording and reporting certain financial transactions, identifying and reporting suspicious activities and safeguarding the privacy of customers’ personal information. For more information regarding the regulations applicable to our business and the risks to which they subject us, see the section entitled “Item 1A—Risk Factors.”

The legal environment is constantly changing as new laws and regulations are introduced and adopted, and existing laws and regulations are repealed, amended, modified or reinterpreted. We work with regulatory authorities, both directly and through our active memberships in industry trade associations, to support our industry and to promote the development of laws and regulations that we believe are equitable to businesses and consumers alike, that facilitate competition thus lowering costs associated with financial products and services, and enable consumers to access myriad responsible credit products that meet their needs.

Due to the evolving nature of laws and regulations, new or revised laws or regulations, or repealed laws or regulations, could adversely impact our current product offerings or alter the economic viability of our existing products and services. For example, the 2017 Final CFPB Rule will likely increase costs, created additional complication and confusion to consumers attempting to repay their loans and lessen the effectiveness of our loan servicing and collections. In addition, in December of 2020, the CFPB issued its debt collection rule – Regulation F - which applies to the third-party collection activities of Ad Astra. The new rule imposes, among other things, strict consumer contact requirements, additional information disclosures to the consumer when attempting to collect the debt and otherwise prescribes prescriptive disclosure contents.

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It is possible that future changes to statutes or regulations will have a material adverse effect on our results of operations or financial condition.

U.S. Regulations

U.S. Federal Regulations

The U.S. federal government and its agencies possess significant regulatory authority over consumer financial services, and these laws and regulations have a significant impact on our operations.

Dodd-Frank. In 2010, the U.S. Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). Title X of this legislation created the CFPB, and provides the CFPB with broad rule-making, supervisory and enforcement powers with regard to consumer financial services. Title X of Dodd-Frank also contains “UDAAP” provisions, which declare unlawful “unfair,” “deceptive” and “abusive” acts and practices in connection with the delivery of consumer financial services and gives the CFPB the power to enforce UDAAP prohibitions and to adopt UDAAP rules defining unlawful acts and practices. Additionally, the Federal Trade Commission Act, Section 5, prohibits “unfair” and “deceptive” acts and practices in connection with a trade or business and gives the Federal Trade Commission enforcement authority to prevent and redress violations of this prohibition.

2017 and 2020 Final CFPB Rules. Pursuant to its authority to adopt UDAAP rules, the CFPB issued the 2017 Final CFPB Rule, which contained both “mandatory underwriting” or “ability-to-repay” (“ATR”) provisions and payment restrictions. The mandatory underwriting provisions applied to short-term consumer loans (with terms of 45 days or less) and longer-term balloon payment loans (i.e., any payments more than twice the size of other payments). These provisions imposed rigid ATR requirements and verification requirements on the industry, subject to a limited exception for certain loans in a sequence starting with a loan limited to $500 and declining for each new loan in the sequence.

The repayment provisions apply to the foregoing loans and to longer-term loans with (i) annual percentage rates exceeding 36% and (ii) lender access to the consumer’s account, whether by ACH, card payment, check or otherwise (i.e., “leveraged payment mechanism”). The payment provisions generally prohibit lenders from seeking payment, without explicit reauthorization, when two consecutive payments have failed due to insufficient funds. The provisions also require a series of prescribed notices for initial payments, “unusual” payments (by amount, payment date or payment modality) and a consumer rights notice after two consecutive payment attempts have failed due to insufficient funds.

The 2017 Final CFPB Rule was originally scheduled to go into effect, in its entirety, in August 2019. However, before that time, the CFPB announced it would reconsider the mandatory underwriting provisions of the 2017 Final CFPB Rule and delay its effective date. Additionally, the Community Financial Services Association (the “CFSA”) and the Consumer Service Alliance of Texas, two industry trade groups, brought a lawsuit (the “Texas Lawsuit”) against the CFPB in a Texas federal district court. The Texas Lawsuit challenged the entire 2017 Final CFPB Rule and resulted in a court-ordered stay of the Rule. In July 2020, the CFPB adopted a new rule (the “2020 Final CFPB Rule”) that rescinded the mandatory underwriting provisions of the 2017 Final CFPB Rule, but left the payment provisions fully intact.

Following adoption of the 2020 Final CFPB Rule, the plaintiffs in the Texas Lawsuit filed an amended complaint and a motion for a preliminary injunction against the remaining payment provisions of the 2017 Final CFPB Rule, arguing that the 2017 Final CFPB Rule is arbitrary and capricious; specifically, insofar as it fails to distinguish in its treatment between declined payment card transactions, which generally do not give rise to bank charges, and dishonored ACH payments and checks, which do. It was further argued to be invalid because it was adopted by a single Director, who, at the time the Rule was enacted, was only dischargeable for cause. The Supreme Court later found this structure unconstitutional and required the Director to be dischargeable without cause under the Dodd-Frank Act. On August 31, 2021, the U.S. District Court granted the CFPB’s motion for summary judgment and denied the plaintiffs’ motion for summary judgment, and ordered compliance with the CFPB Rules by June 13, 2022. Following the Court’s August 31, 2021 Order, plaintiffs filed a Notice of Appeal with the Fifth Circuit and a Motion for Stay Pending Appeal, asking to stay the compliance date until after their appeal is fully and finally resolved. On October 14, 2021, in its unanimous decision, the Fifth Circuit granted the motion by plaintiffs to extend the compliance date until 286 days after resolution of their appeal. Briefing was completed as of January 19, 2022 and oral argument is currently scheduled for the week of May 9, 2022.

Meanwhile, in October 2020, a community group, The National Association for Latino Community Asset Builders ("NALCAB"), filed a lawsuit against the CFPB in the federal district court for the District of Columbia (the “DC Lawsuit”). The DC Lawsuit sought to overturn the 2020 Final CFPB Rule and reinstate the mandatory underwriting provisions of the 2017 Final CFPB Rule on the basis that the rule is arbitrary and capricious. The CFSA has intervened as a defendant in the case and the CFPB has filed a motion to dismiss the complaint for lack of standing, supported by the CFSA. The US District Court granted CFSA’s and the CFPB’s motion to dismiss. NALCAB has until mid-March 2022 to appeal.

We believe that complying with the mandatory underwriting provisions of the 2017 Final CFPB Rule would have been costly and would have had a material adverse effect on our business and results of operations, and would have significantly reduced the

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permitted borrowings by individual consumers. We cannot provide assurance that the CFPB and CFSA will prevail on appeal nor that Congress will not pass legislation and the CFPB will not adopt a rule that could have a material adverse effect on our product offerings, business operations, results of operation or financial condition.

Likewise, we cannot provide assurance that the CFSA will prevail in the Texas Lawsuit. If it does not prevail in the district court or any ensuing appeal, either in whole or at least with respect to debit card transactions, the payment provisions as currently formulated would require significant modifications to our payment, customer notification and compliance systems, as well as create delays in initiating automated collection attempts when payments we initiate are unsuccessful. These modifications would increase our costs and reduce our revenues, albeit to a far lesser extent than the mandatory underwriting provisions. Accordingly, unless the payment provisions are declared invalid in the Texas Lawsuit, they may have a material adverse effect on our results of operations or financial condition.

For additional discussion of the potential impact of the 2017 Final CFPB Rule and 2020 Final CFPB Rule, see “Risk Factors—Risks Relating to Our Industry."

CFPB Debt Collection Rule. In May 2019, the CFPB published in the Federal Register a proposed debt collection rule to amend Regulation F which would apply to debt collectors that are subject to the Fair Debt Collection Practices Act ("FDCPA”), such as our Ad Astra subsidiary. The proposed rule addressed a variety of topics, including third-party debt collector communications, collection practices and collection disclosures. Among other things, the proposed rule announced new restrictions on collection-related communications with consumers, such as imposing a specific limit on the number of times a debt collector can place telephone calls to consumers each week, as well as a mandatory waiting period following a successful telephone communication with the consumer. The proposed rule also offered a series of new collection disclosures. In February 2020, the CFPB supplemented the proposed debt collection rule to amend Regulation F to prescribe federal rules governing disclosures when collecting time-barred debts and debts on behalf of deceased consumers.

On October 30, 2020, the CFPB issued the first part of its Final Debt Collection Practices (Regulation F) Rule (the “Debt Collection Rule”), which, among other things, addressed the use of various communication modalities to collect debts, impose new collection requirements and limitations and clarified existing prohibitions on harassment or abuse, false or misleading representations and unfair debt collection practices under the FDCPA. On December 18, 2020, the CFPB issued the second part of its Final Debt Collection Practices (Regulation F) Rule, which addressed disclosures for consumers when attempting to collect a debt by a collector (e.g., the validation notice), and imposed requirements for furnishing information about a debt to consumer reporting agencies. The CFPB ultimately decided not to mandate any uniform time-barred debt disclosure as initially suggested in the May 2019 proposal, but did set forth in the commentary to the Debt Collection Rule that disclosing the time-barred status of an account when collecting may be required to avoid a UDAAP violation. The full Debt Collection (Regulation F) Rule was effective November 30, 2021. Adoption of the Debt Collection Rule required significant changes in Ad Astra’s collection practices to ensure compliance. While the Debt Collection Rule impacts the way we collect debts in order to comply with Regulation F, we do not believe it will have a material impact on our results of operations.

CFPB Enforcement. In addition to Dodd-Frank's grant of rule-making authority to the CFPB, which resulted in the 2017 Final CFPB Rule and the CFPB Debt Collection Rule, Dodd-Frank gives the CFPB authority to pursue administrative proceedings or litigation for violations of federal consumer financial laws (including Dodd-Frank’s UDAAP provisions and the CFPB’s own rules). In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties ranging from approximately $6,323 per day for ordinary violations of federal consumer financial laws to approximately $31,616 per day for reckless violations and $1,264,622 per day for knowing violations. Also, if a company has violated Title X of Dodd-Frank or CFPB regulations promulgated thereunder, Dodd-Frank empowers state attorneys general and state regulators to bring civil actions for the kind of cease and desist orders available to the CFPB (but not for civil penalties). Potentially, if the CFPB, the FTC or one or more state officials believe we have violated the law, they could exercise their enforcement powers in ways that would have a material adverse effect on us.

CFPB Supervision and Examination. Additionally, the CFPB has supervisory powers over many providers of consumer financial products and services, including explicit authority to examine payday lenders, and has released its Supervision and Examination Manual, which includes a section on Short-Term, Small-Dollar Lending Procedures. In the past, the CFPB has conducted supervisory and/or limited scope examinations of our business. Neither these prior examinations nor any Examination Reports had a material effect on our results of operations or financial condition.

In July 2020, we received a Prioritized Assessment Information Request of Short-Term, Small Dollar Loans for the purpose of determining what changes we made in response to COVID-19 challenges, as well as any associated risks to consumers. The scope of the higher-level inquiry covered the period March 1, 2020 through June 30, 2020. In January 2021, we received a closing letter from the CFPB concerning the Prioritized Assessment Information Request Letter stating that the CFPB does not need to receive any additional information or reporting. Similarly, in June 2020, Ad Astra received a Prioritized Assessment Information Request of Debt Collection for the purpose of determining what changes Ad Astra made in response to COVID-19 challenges, as well as any associated risks to consumers. The scope of this inquiry covered the period January 1, 2020 through

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May 31, 2020. In September 2020, Ad Astra received a closing letter from the CFPB concerning the Prioritized Assessment Information Request Letter stating that the CFPB does not need to receive any additional information or reporting.

The CFPB commenced its first examination of Ad Astra in October 2020, which covered the period from September 1, 2019 through August 31, 2020. The examination is ongoing and its purpose is to assess Ad Astra’s compliance management system and debt collection practices. While we do not expect that matters arising from this examination will have a material impact, Ad Astra has made, and is continuing to make, certain enhancements to its compliance procedures and debt collection practices.

For information on the civil investigative demand related to Heights' business, please see "Risk Factors--Risks Relating to our Business--CFPB investigation into certain of Heights' business practices is uncertain and may materially and adversely affect Heights' business and, ultimately, the combined business."

We cannot predict how current or future examinations or Examination Reports will impact us.

Possible Changes in Practices. While we do not expect that matters arising from our past CFPB examinations will have a material impact on us, we have made, and are continuing to make, at least in part to meet the CFPB's expectations, certain enhancements to our compliance procedures and consumer disclosures. For example, even if the payment provisions of the Final 2017 CFPB Rule do not become effective, we are likely to make changes to our payment practices in a manner that will likely increase our costs and/or reduce our consolidated revenues.

Anti-Arbitration Rule. Under its authority to regulate pre-dispute arbitration provisions pursuant to Section 1028 of Dodd-Frank, in July 2017 the CFPB issued a final rule prohibiting the use of mandatory arbitration clauses with class-action waivers in agreements for certain consumer financial products and services, including those applicable to us. Subsequently, Congress overturned this anti-arbitration rule. As a result, the rule will not become effective, and, pursuant to the Congressional Review Act, substantially similar rules may only be reissued with specific legislative authorization. However, Congress could potentially enact a law having a similar effect.

MLA. The Military Lending Act (the "MLA"), enacted in 2006, amended on July 22, 2015, and implemented by the Department of Defense (the "DoD"), imposes a 36% cap on the “all-in” annual percentage rates charged on loans to active-duty members of the U.S. military, Reserves and National Guard and their dependents. Accordingly, we do not meet all the requirements of the law in order to make loans to borrowers protected by the MLA.

Enumerated Consumer Financial Services Laws, Telephone Consumer Protection Act ("TCPA") and CAN-SPAM. The Truth in Lending Act ("TILA") and Regulation Z require creditors to deliver disclosures to borrowers prior to consummation of both closed-end and open-end loans and, additionally for open-end credit products, periodic billing statements and change-in-terms notices. For closed-end loans, the lender must disclose the annual percentage rate, finance charge, amount financed, total of payments, payment schedule, late fees and any security interest. For open-end credit, the borrower must be provided with key information that includes annual percentage rates and balance computation methods, various fees and charges and any security interest.

Under the Equal Credit Opportunity Act ("ECOA") and Regulation B, we may not discriminate on various prohibited bases, including race, color, religion, national origin, sex, marital status or age (provided that the applicant has the capacity to enter into a binding contract), the fact that all or part of the applicant’s income is due to receipt of government benefits, or retirement or part-time income, or the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act. We must also deliver notices specifying the basis for credit denials, as well as certain other notices.

The Fair Credit Reporting Act ("FCRA") regulates the use of consumer reports and reporting of information to credit reporting agencies. The FCRA limits the permissible uses of credit reports and requires us to provide notices to customers when we take adverse action or increase interest rates based on information obtained from third parties, including credit bureaus.

We are also subject to additional federal requirements with respect to electronic signatures and disclosures under the Electronic Signatures In Global And National Commerce Act ("ESIGN") and requirements with respect to electronic payments under the Electronic Funds Transfer Act ("EFTA)" and Regulation E. The EFTA and Regulation E protect consumers engaging in electronic fund transfers and contain restrictions, required disclosures and provide consumers certain rights relating to electronic fund transfers. Among other limitations, they prohibit creditors from conditioning the extension of credit on the consumer's repayment through electronic fund transfers authorized in advance to recur at substantially equal intervals.

Additionally, we are subject to the TCPA, CAN-SPAM Act and regulations of the Federal Communications Commission, which include limitations on telemarketing calls, auto-dialed calls, pre-recorded calls, text messages and unsolicited faxes. While we believe that our practices comply with the TCPA, the TCPA has nonetheless given rise to a spate of litigation nationwide.

We apply the FDCPA as a guide in conducting our first-party collection activities for delinquent loan accounts, and we are also subject to applicable state collections laws. Ad Astra must comply with the FDCPA and applicable state collections laws related to collection activities.

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Bank Secrecy Act and Anti-Money Laundering Laws. Under regulations issued by the U.S. Department of the Treasury (the "Treasury Department") adopted under the Bank Secrecy Act of 1970 ("BSA"), we must report currency transactions in an amount greater than $10,000 by filing a Currency Transaction Report ("CTR"), and we must retain records for five years for purchases of monetary instruments for cash in amounts from $3,000 to $10,000. Multiple currency transactions must be treated as a single transaction if we have knowledge that the transactions are by, or on behalf of, the same person and result in either cash in or cash out totaling more than $10,000 during any one business day. We are required to file a CTR for any transaction which appears to be structured to avoid the required filing where the individual transaction or the aggregate of multiple transactions would otherwise meet the threshold and require the filing of a CTR.

The BSA also requires us to register as a money services business with the Financial Crimes Enforcement Network of the Treasury Department ("FinCEN"). This registration is intended to enable governmental authorities to better enforce laws prohibiting money laundering and other illegal activities. We are registered as a money services business with FinCEN. We must also maintain a list of names and addresses of, and other information about, our stores and must make that list available to FinCEN and any requesting law enforcement or supervisory agency. That store list must be updated at least annually.

Federal anti-money-laundering laws make it a criminal offense to own or operate a money transmittal business without the appropriate state licenses, which we maintain. In addition, the USA PATRIOT Act of 2001 and its corresponding federal regulations require us, as a “financial institution,” to establish and maintain an anti-money-laundering program. Such a program must include: (i) internal policies, procedures and controls designed to identify and report money laundering; (ii) a designated compliance officer; (iii) an ongoing employee-training program; and (iv) an independent audit function to test the program. In addition, federal regulations require us to report suspicious transactions involving at least $2,000 to FinCEN. The regulations generally describe four classes of reportable suspicious transactions: one or more related transactions that the money services business knows, suspects or has reason to suspect, (i) involve funds derived from illegal activity or are intended to hide or disguise such funds, (ii) are designed to evade the requirements of the BSA, (iii) appear to serve no business or lawful purpose, or (iv) involve the use of the money service business to facilitate criminal activity.

The Office of Foreign Assets Control ("OFAC") publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted or sanctioned countries. It also lists individuals, groups and entities, such as terrorists and narcotics traffickers, designated under programs that are not country-specific. Collectively, such individuals and companies are called “Specially Designated Nationals.” Their assets are blocked and we are generally prohibited from dealing with them.

Privacy Laws. The Gramm-Leach-Bliley Act of 1999, as updated by the FTC’s final Safeguards Rule and its implementing federal regulations, requires us to protect the confidentiality of our customers’ nonpublic personal information and to disclose to our customers our privacy policy and practices, including those regarding sharing the customers’ nonpublic personal information with third parties. That disclosure must be made to customers at the time the customer relationship is established and at least annually thereafter. The FTC’s final Safeguards Rule includes, among other things, (i) detailed requirements for an information security program; (ii) new requirements for accountability, e.g., designation of a Qualified Individual; (iii) an expansion of the definition of a financial institution; and (iv) new definitions and examples. Under the final Safeguards Rule, safeguards must address access controls, data inventory and classification, encryption, secure development of application practices, authentication, information disposal procedures, change management, testing and incident response. Our Board of Directors has appointed a Qualified Individual and adopted a Safeguards Rule Policy.

U.S. State and Local Regulations

Currently, we make loans in approximately 27 states in the U.S. pursuant to enabling legislation that specifically allows direct loans of the type that we make. In one state, we make open-end loans pursuant to a contractual choice of Kansas law. In Texas, we operate under a CSO model, where we are paid by borrowers to facilitate loans from lenders unaffiliated with us.

Short-term consumer loans must comply with extensive laws of the states where our stores are located or, in the case of our online loans, where the borrower resides.

In the event of serious or systemic violations of state law by us or, in certain instances, our third-party service providers when acting on our behalf, we would be subject to a variety of regulatory and private sanctions. These could include license suspension or revocation (not necessarily limited to the state or product to which the violation relates); orders or injunctive relief, including orders providing for rescission or reformation of transactions or other affirmative relief; and monetary relief. Depending upon the nature and scope of any violation and/or the state in question, monetary relief could include restitution, damages, fines for each violation and/or payments to borrowers equal to a multiple of the fees we charge and, in some cases, principal as well. Thus, violations of these laws could potentially have a material adverse effect on our results of operations or financial condition. For more information regarding the regulations applicable to our business and the risks to which they subject us, see the section entitled “Item 1A—Risk Factors.”

Recent and Potential Future Changes in the Law: During the past few years, legislation, ballot initiatives and regulations have been proposed or adopted in various states that would prohibit or severely restrict our short-term consumer lending.

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In California, Assembly Bill 539 became effective on January 1, 2020. AB 539 imposes an annual interest rate cap of 36% plus the Federal Funds Rate (0.25% as of December 31, 2020) on all consumer loans between $2,500 and $10,000. Our California Installment loans, impacted by AB 539, produced 2.9% of our total consolidated revenue from continuing operations for the year ended December 31, 2021. Gross loans receivable on California Installment loans impacted by AB 539 amounted to $11.3 million as of December 31, 2021. We continue to evaluate alternatives available to service customers in the California market. There can be no assurance that we will be able to implement a strategy to replace our California Installment loans at rates above 36%, or if we do, that we will be able to avoid or prevail in any legal attacks on any such strategy. We have launched a test California installment loan at rates in compliance with the new restrictions. At this point, it is too early to determine if these new lower-rate installment loans will be sustainable or profitable. Refer to “Item 1A—Risk Factors” for additional information regarding the impact of this law to our business.

We, along with others in the short-term consumer loan industry, intend to continue to inform and educate legislators and regulators and to oppose legislative or regulatory action that would unduly prohibit or severely restrict short-term consumer loans as compared with those currently allowed. Nevertheless, if legislative or regulatory action with that effect were taken in states in which we have a significant number of stores (or at the federal level), that action could have a further material adverse effect on our loan-related activities and revenues.

Texas CSO Lending: The CSO model is expressly authorized under Section 393 of the Texas Finance Code. As a CSO, we serve as a servicer for consumers to obtain credit from independent, non-bank consumer lending companies and we guaranty the lender against loss. As required by Texas law, we are registered as a CSO and, for our online services and services in some storefronts, also licensed as a CAB. Texas law subjects us to audit by the state’s Office of Consumer Credit Commissioner and requires us to provide expanded disclosures to customers regarding credit service products.

Nearly 50 Texas cities, including Austin, Dallas, San Antonio and Houston, have passed substantially similar local ordinances addressing products offered by CABs. These local ordinances place restrictions on the amounts that can be loaned to customers and the terms under which the loans can be repaid. As of December 31, 2021, we operated 54 stores in Texas cities with local ordinances. We were cited by the City of Austin in July 2016 for alleged violations of an Austin ordinance addressing products offered by CSOs. We believe that: (i) the ordinance conflicts with Texas state law, and (ii) our product in any event complies with the ordinance, when the ordinance is properly construed. The Austin Municipal Court agreed with our position that the ordinance conflicts with Texas law and, accordingly, did not address our second argument. However, in September 2017, the Travis County Court reversed this decision and remanded the case to the Municipal Court for further proceedings consistent with its opinion (including, presumably, a decision on our second argument). To date, a hearing and trial on the merits have not been scheduled.

In May 2020, the City of Austin proposed a second ordinance that became effective June 1, 202 and implemented restrictions on CSO transactions and revised certain definitions included in the original Austin ordinance. These revisions potentially affect the foundation upon which our previous arguments in municipal court were based. In June 2021, we launched a new product in the City of Austin to adhere to the updated ordinance. The City commenced audits of the new product in January 2022. The City advised that additional audits will be performed in the coming months to ensure full compliance, which would ultimately result in a resolution of all outstanding matters.

California Privacy Rights Act: The California Consumer Privacy Act (“CCPA”) became effective January 1, 2020. CCPA broadens consumer rights with respect to personal information, imposing expanded obligations to disclose the categories and uses of personal information a business collects, providing consumers a right to access that information, a right to opt out of the sale of personal information, and a right to request that a business delete personal information about the consumer subject to certain exemptions. CCPA provides for civil penalties for violations, as well as a private right of action for data breaches, which may increase the costs of data breach litigation. A ballot initiative passed November 2020 entitled California Privacy Rights Act (“CPRA”) mirrors many concepts from the European General Data Protection Regulation, which becomes effective January 1, 2023 but contains a look back provision to January 1, 2022. This initiative expands consumer rights such as a right to correct inaccurate information, restricts ability to share information, establishes an independent agency, the California Privacy Protection Agency (“CPPA”) with enforcement and rule making authority, and requires data minimization and publication requirements related thereto. The CPRA extends the exemption of the original CCPA legislation to employee and business-to-business data, except as to notice requirements, until the effective date. The CPPA is instructed to provide substantial regulations by July 1, 2022. We anticipate this having a further impact on our business leading up to the effective date of January 1, 2023 as we work to become compliant with the new provisions while awaiting the regulations. We anticipate that other states and possibly the federal government will adopt laws similar to the CPRA in the future. While it is too early to know the full impact, these developments could increase costs or otherwise adversely affect our business.

Interest Rate "Unconscionability" in California: In the 2017 case of De La Torre v. CashCall, Inc., the Ninth Circuit U.S. Court of Appeals certified the following question to the California Supreme Court: “Can a 96% interest rate on consumer loans of $2500 or more governed by California Finance Code § 22303, render the loans unconscionable under California Finance Code § 22302?” In August 2018, the California Supreme Court decided that the interest rate on a consumer loan of $2,500 or more can render the loans unconscionable under Cal. Fin. Code § 22303. However, the Court did not address whether the loans in question were in fact unconscionable. The Court stressed that in order to find that an interest rate is unconscionable, courts must conduct an individual analysis of whether "under the circumstances of the case, taking into account the bargaining process

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and prevailing market conditions" a "particular rate was 'overly harsh,' 'unduly oppressive,' or 'so one-sided as to shock the conscience.'" This analysis is "highly dependent on context" and "flexible," according to the Court. The Court warned that lower courts should be wary of and must avoid remedies that amount to an "across-the-board imposition of a cap on interest rates."

Subsequent to the California Supreme Court’s decision in De La Torre, two class action lawsuits were filed against Speedy Cash, a Company subsidiary, in the Southern District of California. See "--Note 8. Commitments and Contingencies." Both cases have been dismissed and settled for immaterial amounts.

A California statute took effect as of January 1, 2020 that prohibits finance lenders from issuing loans between $2,500 and $10,000 with charges over 36% calculated as an annual simple interest rate (plus the prior month’s Federal Funds Rate).

Canada Regulations

Unsecured Installment Loans, Revolving LOC Loans and POS/BNPL Products

Unsecured Installment loans, Revolving LOC loans and POS/BNPL products are regulated at both the federal and provincial level in Canada. At the federal level, such lending products are subject to the criminal rate of interest provisions of the Criminal Code, which prohibit receiving (or entering into an agreement to receive) interest at an effective annual rate that exceeds 60% on the credit advanced under the loan agreement. These provisions have been in place, unchanged, since 1980, although they have been subject to periodic review and consultation.

Providers of these types of loans are also subject to provincial legislation that requires lenders to provide cost of credit disclosures and extend consumer protection rights to borrowers, such as prepayment rights, and prohibits the charging of certain default fees. Such laws are relatively harmonized in most Canadian jurisdictions, with some exceptions, notably Quebec. At this time, the only loan product we offer in Quebec is the FlexitiCard, which is a credit card product that runs on Flexiti's private network.

In addition, Alberta, Manitoba and Quebec have enacted legislation that specifically regulates high-cost credit grantors. These laws define a high-cost credit product and require licensing and additional consumer protection oversight. Manitoba was the first province to enact such legislation in 2016, followed by Alberta and Quebec in 2019.

High-cost credit laws will become effective in British Columbia on May 1, 2022. Regulations, among other things, prescribe the rate and criteria for the purposes of the definition of “high-cost credit product,” establish a licensing and oversight regime, provide for additional cancellation right provisions and prohibit concurrent lending between loan products. It is too early to predict the impact of such laws and potential regulations on our results of operations.

As of December 31, 2021, we operated 23 of our 201 Canada Direct Lending stores and conducted online lending in British Columbia. Revenues in British Columbia were approximately 11.3% of our Canada Direct Lending revenues and 3.5% of total consolidated revenues for the year ended December 31, 2021.

In Ontario, Bill 59 titled “Putting Consumers First Act (the “PCF Act”), which proposed additional consumer protection measures, received Royal Assent in April 2017. The PCF Act provides the Ontario Ministry with the authority to impose additional restrictions on lenders which offer installment loans, subject to a regulatory process, including: (i) requiring a lender to take into account certain factors with respect to the borrower before entering into a credit agreement with that borrower; (ii) capping the amount of credit that may be extended; (iii) prohibiting a lender from initiating contact with a borrower for the purpose of offering to refinance a loan; and (iv) capping the amount of certain fees that do not form part of the cost of borrowing. In July 2017, the Ministry of Government and Consumer Services in Ontario issued a consultation document requesting feedback on questions regarding a new regime for high-cost credit and limits on optional services, such as optional credit protection insurance. The proposed high-cost credit regime would apply to loans with an annual interest rate that exceeds 35%. The Ministry summary accompanying the consultation document stated that a further consultation paper would be issued in the fall of 2017 on those matters and that the Ministry expected that regulations would be published in early 2019.

In January 2021, the Ontario government launched a subsequent consultation on the regulation of high-cost credit. The consultation proposals include defining high-cost credit to include loans with an annual interest rate that exceeds the Bank of Canada Bank Rate plus 25%, and additional licensing, borrower protections and fees that could be charged in connection with any loan that would fall under the definition of high-cost credit. The consultation closed in March 2021.

On March 16, 2021, Ontario held a roundtable to solicit industry feedback on a government proposal for regulation of alternative financial services other than Single-Pay loans. The consensus among stakeholders was that regulations should not be overly prescriptive (i.e., use existing Consumer Protection and Collection Practices Act for the regulatory framework), and to harmonize with provinces that are already regulating so-called high-cost credit products. There have been no further developments. It is too early to predict the outcome of this consultation process and its impact on our results operations.

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As of December 31, 2021, we operated 134 of our 201 Canada Direct Lending stores and conducted online lending in Ontario. Canada Direct Lending revenues in Ontario were approximately 64.2% of our Canada Direct Lending revenues and 20.2% of total consolidated revenues for the year ended December 31, 2021.

Single Pay

In May 2007, Canadian federal legislation was enacted that exempts from the criminal rate of interest provisions of the Criminal Code cash advance loans of $1,500 or less if the term of the loan is 62 days or less (“payday loans”) and the lender is licensed under provincial legislation as a short-term cash advance lender and the province has been designated under the Criminal Code.

Currently, Ontario, Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island and Saskatchewan have provincial enabling legislation allowing for payday loans and have also been designated under the Criminal Code. Under the provincial payday lender legislation there are generally cost of borrowing disclosure requirements, collection activity requirements, caps on the cost of borrowing that may be recovered from borrowers and restrictions on certain types of lending practices, such as extending more than one payday loan to a borrower at any one time. At this time, we offer our Single Pay loans in British Columbia, Manitoba, Newfoundland, Nova Scotia, Ontario and Saskatchewan.

Canadian provinces periodically review the regulations for payday loan products. Some provinces specify a time period within the applicable law while other provinces are silent or simply note that reviews will be periodic. In British Columbia, the last review of the payday loan rate resulted in a decrease of the total cost of borrowing to C$15 per C$100 lent effective September 1, 2018. In Manitoba, the last review was in 2016 and the rate of C$17 per C$100 lent was kept unchanged. In Nova Scotia, the last review was in 2018 and the rate was lowered to $19 per $100. Nova Scotia has scheduled their next review for March 2022. Payday loan legislation came into force in Newfoundland in April 2019, with a maximum rate set at C$21 per $100 lent; such rate remains unchanged. In Nova Scotia, the last review was conducted in 2018 and the maximum cost of borrowing was reduced to C$19 per C$100, effective February 1, 2019. Effective February 2018, Saskatchewan amended its payday loan legislation to provide that the maximum rate that may be charged to a borrower be reduced to C$17 per C$100 lent, and the maximum fee for a dishonored check was set at C$25.

Check Cashing

In Canada, the federal government generally does not regulate check cashing businesses, except in respect of federally regulated financial institutions (and other than the Criminal Code of Canada provisions noted above in respect of charging or receiving in excess of 60% annual interest rate on the credit advanced in respect of the fee for a check cashing transaction), nor do most provincial governments generally impose any regulations specific to the check cashing industry. The exceptions are the provinces of Quebec, where check cashing stores are not permitted to charge a fee to cash a government check; and Manitoba, British Columbia and Ontario, where the province imposes a maximum fee to be charged to cash a government check. The province of Saskatchewan also regulates the check cashing business but only in respect of provincially regulated loan, trust and financing corporations. We do not offer check cashing in the province of Quebec.

Available Information

Information about us, including our Code of Business Conduct and Ethics, Corporate Governance Guidelines and charters of our standing committee is available at our website at www.curo.com. Printed copies of the documents listed above are available upon request, without charge, by writing to us at 3615 North Ridge Road, Wichita, Kansas 67205, Attention: Investor Relations.

We also make available through our website at www.ir.curo.com, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports (along with certain other Company filings with the SEC) as soon as reasonably practicable after we electronically file those reports with or furnish them to the SEC. These materials are also accessible on the SEC's website at www.sec.gov.

ITEM 1A.     RISK FACTORS

Our operations and financial results are subject to many risks and uncertainties that could adversely affect our business, results of operations, financial condition or share price. While we believe the discussion below addresses the key risk factors affecting our business, there may be additional risks and uncertainties not currently known or that we currently deem to be immaterial that may become material in the future or that could adversely affect our business, results of operations, financial condition or share price. You should carefully consider the risk factors.

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Risks Relating to Our Business

If our allowance for loan losses is not adequate to absorb our actual losses, this could have a material adverse effect on our results of operations or financial condition.

Our customers may fail to repay their loans in full. We maintain an allowance for loan losses for estimated probable losses on company-funded loans and loans in default. See Note 1, “Summary of Significant Accounting Policies and Nature of Operations”

of the Notes to Consolidated Financial Statements for factors we consider when estimating the allowance for loan losses. We also maintain a liability for estimated incurred losses on loans funded by third-party lenders under our CSO programs, which we guarantee. As of December 31, 2021, our aggregate allowance for loan losses and liability for losses associated with the guaranty for loans not in default (including loans funded by third-party lenders under our CSO programs) was $94.5 million. This reserve is an estimate. Actual losses are difficult to forecast, especially if losses stem from factors that we have not experienced historically, and unlike traditional banks, we are not subject to periodic review by bank regulatory agencies of our allowance for loan losses. In addition, Flexiti offers loans to consumers with a variety of no interest and/or no payment promotional offers. While many of Flexiti’s customers have prime credit scores, these promotional offers can make credit losses less predictable. As a result, our allowance for loan losses may not be sufficient to cover incurred losses or comparable to that of traditional banks subject to regulatory oversight. If actual losses are greater than our reserve and allowance, this could have a material adverse effect on our results of operations or financial condition.

Because of the non-prime nature of our customers, we have experienced a high rate of NCOs as a percentage of revenues and it is essential that we price loans appropriately. We rely on our proprietary credit and fraud scoring models to forecast loss rates. If we are unable to effectively forecast loss rates, it will negatively and materially impact our operating results.

Because of the non-prime nature of our customers, we have experienced a high rate of NCOs as a percentage of revenues and it is essential that we price loans appropriately. We rely on our proprietary credit and fraud scoring models to forecast loss rates. If we are unable to effectively forecast loss rates, it will negatively and materially impact our operating results.

Because of the non-prime nature of our customers, we have much higher charge-off rates than traditional lenders. Accordingly, it is essential that we price our products appropriately to account for these credit risks. In deciding whether to extend credit, and the terms on which we or the originating lenders are willing to provide credit, including the price, we and the originating lenders rely heavily on our proprietary credit and fraud scoring models, which are an empirically derived suite of statistical models built using third-party data, customer data and our historical credit experience. If we do not regularly enhance our scoring models to ensure optimal performance, our models may become less effective. If we are unable to rebuild our scoring models or if they do not perform as expected, our products could experience increasing defaults, higher customer acquisition costs, or both.

If our scoring models fail to adequately predict the creditworthiness of customers, or if they fail to assess prospective customers’ ability to repay loans, or other components of our credit decision process fails, higher than forecasted losses may result. Similarly, if our scoring models overprice our products, we could lose customers. Among other things, factors such as COVID-19 impact our customers' ability to repay loans, and government programs focused on the pandemic, such as stimulus programs, or the cessation of such programs, or an inflationary environment , can further add volatility to loan balances, repayments and profitability. Furthermore, if we are unable to access third-party data, or access to such data is limited or cost prohibitive, our ability to accurately evaluate potential customers will be compromised. As a result, we may be unable to effectively predict probable credit losses inherent in the resulting loan portfolio, and we, and the originating lender (where applicable), may experience higher defaults or customer acquisition costs, which could have a material adverse effect on our business, prospects, results of operations or financial condition.

Additionally, if any of the models or tools used to underwrite loans contain errors in development or validation, such loans may result in higher delinquencies and losses. Moreover, if future performance of customer loans differs from past experience, delinquency rates and losses could increase, all which could have a material adverse effect on our business, prospects, results of operations or financial condition. An inability to effectively forecast loss rates could also inhibit our ability to borrow from our debt facilities, which could further hinder our growth and have a material adverse effect on our business, prospects, results of operations or financial condition.

Changes in the demand for our products and specialty financial services or our failure to adapt to such changes could have a material adverse effect on our business, prospects, results of operations or financial condition.

The demand for a product or service may change due to many factors such as regulatory restrictions that reduce customer access to products, the availability of competing products, reduction in our marketing spend, macroeconomic changes or changes in customers’ financial conditions among others. If we do not adapt to a significant change in customers’ demand for, or access to, our products or services, our revenue could decrease significantly. Even if we make adaptations or introduce new products or services, customer demand could decrease if the adaptations make them less attractive or less available, all of which could have a material adverse effect on our business, prospects, results of operations or financial condition.

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If we are unable to manage growth effectively, our results of operations or financial condition may be materially adversely affected.

We may not be able to successfully grow our business. Failure to grow the business and generate sufficient levels of cash flow could inhibit our ability to service our debt obligations. Our expansion strategy, which contemplates disciplined growth in Canada and the U.S., increasing the market share of our online operations, selectively expanding our offering of installment loans and potential expansion in other international markets, is subject to significant risks. The profitability of our operations and any future growth depends upon many factors, including our ability to appropriately price our products, manage credit risk, respond to regulatory and legislative changes, obtain and maintain financing, hire, train and retain qualified employees, obtain and maintain required permits and licenses and other factors, some of which are beyond our control, such as changes in regulation and legislation. As a result, our profitability and cash flows could suffer if we do not successfully implement our growth strategy.

We may not achieve the expected benefits of businesses we acquire, including Flexiti and Heights, and any acquisition could disrupt our business plans or operations.

From time-to-time, we may acquire other businesses that may enhance our product platform or technology, expand the breadth of our markets or customer base or advance our business strategies. The success of any acquisition depends upon our ability to effectively integrate the management, operations and technology of the acquired business into our existing management, operations and technology platforms. Integration can be complex, expensive and time-consuming. The failure to successfully integrate acquired businesses into our organization in a timely and cost-effective manner could materially adversely affect our business, prospects, results of operations or financial condition. The integration process could involve loss of key employees, disruption of ongoing businesses and/or loss of customers, incurrence of tax costs or inefficiencies or inconsistencies in standards, controls, information technology systems, procedures and policies. As a result, our ability to maintain relationships with customers, employees or other third-parties or our ability to achieve the anticipated benefits of acquisitions could be adversely affected and harm our financial performance.

The process of integrating formerly separately operated businesses may prove disruptive to both businesses, may take longer than we anticipate and may cause an interruption of and have a material adverse effect on our combined businesses. In that regard, we may not be able to successfully integrate Flexiti or Heights or otherwise realize the expected benefits of these acquisitions, including anticipated annual revenue and profits, operating costs and capital synergies, and the combined businesses could underperform relative to our expectations.

Even if we are able to successfully integrate the Heights business into our operations, we may not realize the anticipated cost saving synergies of the acquisition on the time table currently contemplated, or at all.

We acquired Heights based, in part, on the expectation that the acquisition would result in various cost saving synergies. Even if we can successfully integrate the Heights business into our operations, there can be no assurance that we will realize the expected cost saving synergies on the timetable currently contemplated, or at all. We expect to incur significant restructuring charges (including severance) and transition expenses in connection with these cost saving synergies. Achieving the expected cost saving synergies, as well as the costs of achieving them, is subject to a number of uncertainties and other factors. If these factors limit our ability to achieve the expected cost saving synergies of the acquisition or if the related costs exceed our estimates, our expectations of future results of operations, including the cost saving synergies expected to result from the acquisition, may not be met. Additionally, the actions we take to achieve cost saving synergies could have unintended consequences that adversely affect our business. If we encounter difficulties in achieving the expected cost saving synergies or do not achieve such cost saving synergies, we incur significantly greater costs related to such cost saving synergies than we anticipate or our activities related to such cost saving synergies have unintended consequences, our business, financial condition and results of operations could be adversely affected.

The outcome of a CFPB investigation into certain of Heights’ business practices is uncertain and may materially and adversely affect Heights’ business and, ultimately, the combined business.

In April 2020, Heights (then Southern Management Corporation) received a civil investigative demand (“CID”) from the CFPB. We have received and responded to additional CIDs and are fully cooperating with the investigation.

The CFPB has not yet made any allegations in the investigation, and we are currently unable to predict the eventual scope, ultimate timing or outcome of the CFPB investigation. While we are indemnified under the acquisition document for certain losses that arise with respect to the CFPB investigation, there can be no assurance that such indemnification will be sufficient to address all covered losses or that the CFPB’s ongoing investigation or future exercise of its enforcement, regulatory, discretionary or other powers will not result in findings or alleged violations of consumer financial protection laws that could lead to enforcement actions, proceedings or litigation, whether by the CFPB, other state or federal agencies, or other parties, and the imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, settlements or changes to Heights’s business practices or operations that could materially and adversely affect Heights’ or the combined business’, financial condition, results of operations or reputation.

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Our substantial indebtedness could materially impact our business, results of operations or financial condition.

We have significant debt. The amount of our indebtedness could have significant effects on our business, including:

•making it more difficult to satisfy our financial obligations;

•inhibiting our ability to obtain additional financing for operational and strategic purposes;

•requiring the use of a substantial portion of our cash flow from operations to pay interest on our debt, which reduces funds available for other operational and strategic purposes;

•putting us at a competitive disadvantage compared to our competitors that may have proportionately less debt;

•restricting our ability to pay dividends; and

•limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.

For instance, our ability to offer our current products or services or the financial performance of these products and services could be negatively impacted by regulatory changes, which could inhibit our ability to comply with the terms of our debt.

If our cash flows and capital resources are insufficient to fund our debt obligations, or if we confront regulatory uncertainty or challenges in debt capital markets, we may not be able to refinance our indebtedness prior to maturity on favorable terms, or at all. In addition, prevailing interest rates or other factors at the time of refinancing could increase our interest or other debt capital expense. A refinancing could also require us to comply with more onerous covenants on our business operations. If we are unable to refinance our indebtedness prior to maturity we will be required to pursue alternative measures that could include restructuring our current indebtedness, selling all or a portion of our business or assets, seeking additional capital, reducing or delaying capital expenditures, or taking other steps to address obligations under the terms of our indebtedness.

Our ability to meet our debt obligations depends on our future performance, which will be affected by financial, business, economic, regulatory and other factors, many of which we cannot control or predict. Our business may not generate sufficient cash flow from operations and we may not realize our anticipated growth in revenue and cash flow, either of which could result in being unable to repay indebtedness, or to fund other liquidity needs. If we do not have enough capital resources, we may need to refinance all or part of our debt, sell assets or borrow more funds, which we may not be able to do on terms acceptable to us, or at all. In addition, the terms of existing or future debt agreements may restrict us from pursuing any of these alternatives.

In preparing our financial statements, including implementing accounting principles, financial reporting requirements or tax rules or tax positions, we use our judgment and that judgment encompasses many risks.

We prepare our financial statements in accordance with U.S. GAAP and its interpretations are subject to change. If new rules or interpretations of existing rules require us to change our accounting, financial reporting or tax positions, our results of operations or financial condition could be materially adversely affected, and we could be required to restate financial statements. Preparing financial statements requires management to make estimates and assumptions, including those impacting allowances for loan losses, goodwill and intangibles and accruals related to self-insurance and CSO guarantee liability. These affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as well as the reported amounts of revenue and expenses. In addition, management’s judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. As a result, our assumptions and provisions may not be sufficient to cover actual losses. If actual losses are greater than our assumptions and provisions, our results of operations or financial condition could be adversely affected.

Further, FASB issued new guidance that will require us to adopt the current expected credit loss (“CECL”) model to evaluate impairment of loans. The CECL approach, effective for us by January 1, 2023, requires evaluation of credit impairment based on an estimate of life of loan losses as opposed to credit impairment based on incurred losses. If we misinterpret or make inaccurate assumptions under the new guidance, our results of operations or financial condition could be adversely affected.

Changes in our financial condition or a potential disruption in the capital markets could reduce available capital.

If we do not have sufficient funds from our operations, excess cash or debt agreements, we will be required to rely on banking and credit markets to meet our financial commitments and short-term liquidity needs. We also expect to periodically access debt capital markets to finance the growth of our consumer loans receivable portfolio. Efficient access to such markets, which could be critical for us, may be restricted due to many factors, including deterioration of our earnings, cash flows or balance sheet quality, overall business or industry prospects, adverse regulatory changes, disruption to or deterioration in capital markets, a rising interest rate environment or a negative bias toward our industry by consumers. Disruptions and volatility in capital markets may cause banks and other credit providers to restrict availability of new credit. We may also have more limited access to commercial bank lending than other businesses due to the negative bias toward our industry. If adequate funds are not available, or are not available at favorable terms, we may not have sufficient liquidity to fund our operations, make future investments, take advantage of strategic opportunities or respond to competitive challenges, all of which could negatively impact our ability to achieve our strategic plans. Additionally, if the capital and credit markets experience volatility, and the availability of funds is limited, third parties with whom we do business may incur increased costs or business disruption and this could have a material adverse effect on our business relationships with such third parties.

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Adverse economic conditions, including those resulting from weather-related events or other natural disasters, man-made events or health emergencies, could have an adverse impact on our business or the economy and could cause demand for our loan products to decline or make it more difficult for our customers to make payments on our loans and increase our default rates, which could adversely affect our results of operations or financial condition.

Adverse economic conditions, including those resulting from weather-related events or other natural disasters, man-made events or health emergencies, could have an adverse impact on our business or the economy and could cause demand for our loan products to decline or make it more difficult for our customers to make payments on our loans and increase our default rates, which could adversely affect our results of operations or financial condition.

We operate stores across the U.S. and Canada and derive the majority of our revenue from consumer lending. Macroeconomic conditions, such as levels of employment, personal income and consumer sentiment, may influence demand for our products. Additionally, weather-related events, power losses, telecommunication failures, terrorist attacks, acts of war, widespread health emergencies and similar events, may significantly impact our customers’ ability to repay their loans and cause other negative impacts on our business. These conditions may result in us changing the way we operate our business, including tightening credit, waiving certain fees and granting concessions to customers.

Our underwriting standards require our customers to have a steady source of income. Therefore, if unemployment increases among our customer base, the number of loans we originate may decline and defaults could increase. If consumers become more pessimistic regarding the economic outlook and spend less and save more, demand for consumer loans may decline. Accordingly, poor economic conditions could have a material adverse effect on our results of operations or financial condition.

In addition, a widespread health emergency, such as COVID-19, and perceptions regarding its impact, may continue to negatively affect the North American and global economy, travel, employment levels, employee productivity, demand for and repayment of our loan products and other macroeconomic activities, which could adversely affect our business, results of operations or financial condition. Given the dynamic nature of the COVID-19 pandemic, however, the extent to which it may impact our results of operations or financial condition will depend on future developments, which are highly uncertain and cannot be predicted.

Failure to comply with debt collection regulations, or failure of our third-party collection agency to comply with debt collection regulations, could subject us to fines and other liabilities, which could harm our reputation and business.

In 2020, we acquired Ad Astra, our exclusive provider of third-party collection services for U.S. operations. Both federal and state law regulate debt collection communication and activities. Regulations governing debt collection are subject to changing interpretations that differ from jurisdiction to jurisdiction. Regulatory changes could make it more difficult for us and any collections agencies we may use to effectively collect on the loans we originate.

In 2016, the CFPB issued the 2016 CFPB Outline intended to increase consumer protection pertaining to third-party debt collectors and others covered by the FDCPA. The 2016 CFPB Outline would apply to the attempts of our third-party collection agency to collect debt originated by other lenders, including under our CSO programs. The proposals would not apply to our attempts to collect debt that we originate; however, the CFPB has announced that it plans to address consumer protection issues involving first-party debt collectors and creditors separately. In October 2020, the CFPB issued the first part of its Final Debt Collection Practices (Regulation F) Rule which addressed, among other things, communications in connection with debt collection and prohibitions on harassment or abuse, false or misleading representations and unfair debt collection practices. See "Regulatory Environment and Compliance—U.S. Regulations—U.S. Federal Regulations—CFPB Debt Collection Rule." Adoption of the Regulation F Rule will require significant changes in Ad Astra’s collection and we are not able to give any assurance that the effect of these new rules will not have a material impact on our results of operations or financial condition.

We may be limited in our ability to collect on our loan portfolio, and the security interests securing a significant portion of our loan portfolio are not perfected, which may increase our credit losses.

Legal and practical limitations may limit our ability to collect on our loan portfolio, resulting in increased credit losses, decreased revenues and decreased earnings. State and federal laws and regulations restrict our collection efforts and the amounts that we are able to recover from the repossession and sale of collateral in the event of a customer’s default typically do not fully cover the outstanding loan balance and costs of recovery. A significant portion of our secured loans have not been and will not be perfected, which means that we cannot be certain that such security interests will be given first priority over other creditors. The lack of perfected security interests is one of several factors that may make it more difficult for us to collect on our loan portfolio. Additionally, for those of our loans that are unsecured, borrowers may choose to repay obligations under other indebtedness before repaying loans to us because such borrowers may feel that they have no collateral at risk. In addition, given the relatively small size of our loans, the costs of collecting loans may be high relative to the amount of the loan. As a result, many collection practices that are legally available, such as litigation, may be financially impracticable. These factors may increase our credit losses, which would have a material adverse effect on our results of operations and financial condition.

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Goodwill comprises a significant portion of our assets. We assess goodwill for impairment at least annually. If we recognize an impairment, it could have a material adverse effect on our results of operations or financial condition.

We assess goodwill for impairment on an annual basis at the reporting unit level. We assess goodwill between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Our impairment reviews require extensive use of accounting judgment and financial estimates. Application of alternative assumptions and definitions could produce significantly different results. We may be required to recognize impairment of goodwill based on future events or circumstances. A material impairment of goodwill could adversely affect our results of operations or financial condition. Due to the current economic environment and the uncertainties that future economic consequences will have on our reporting units, we cannot be sure that our estimates and assumptions made for purposes of our annual goodwill impairment test will be accurate predictions of the future. If our assumptions regarding forecasted revenues or margins for our reporting units are not achieved, we may be required to record goodwill impairment losses in the future. We cannot determine if any such future impairment will occur, and if it does occur, whether such charge would be material.

Our lending business is somewhat seasonal which causes our revenues to fluctuate and could have a material adverse effect on our ability to service our debt obligations.

Our U.S. business typically experiences reduced demand in the first quarter because of customers’ receipt of tax refund checks. Demand for our U.S. lending services is generally greatest during the third and fourth quarters. This seasonality requires us to manage our cash flows during the year. If a governmental authority pursued economic stimulus actions or issued additional tax refunds or tax credits at other times during the year, such actions could have a material adverse effect on our business, prospects, results of operations or financial condition during those periods. If our revenues fall substantially below expectations during certain periods, our annual results and our ability to service our debt obligations could be materially adversely affected.

Our debt agreements contain covenants which may restrict our flexibility to operate our business. If we do not comply with these covenants, our failure could have a material adverse effect on our results of operations or financial condition.

Our debt agreements contain customary covenants, including limitations on indebtedness, liens, investments, subsidiary investments and asset dispositions, and require us to maintain certain leverage and interest coverage ratios. Failure to comply with these covenants could result in an event of default that, if not cured or waived, could reduce our liquidity and have a material adverse effect on our operating results and financial condition. In addition, an event of default under one of our debt agreements may result in all of our outstanding debt to become immediately due and payable.

In addition, our SPV facilities contain certain performance covenants on the receivables pledged to each respective facility. If we violate these covenants, our ability to draw under these facilities could be impacted. Further, we may be required to redirect all excess cash to the lenders.

Failure to comply with debt covenants could have a material adverse effect on our liquidity, results of operation or financial condition if we are unable to access capital when we need it or if we are required to reduce our outstanding indebtedness

Because we depend on third-party lenders to provide cash needed to fund our loans, an inability to affordably access third-party financing could have a material adverse effect on our business.

Our principal sources of liquidity to fund our customer loans are cash provided by operations, funds from third-party lenders under CSO programs and our SPV facilities. We may not be able to secure additional operating capital from third-party lenders or refinance our existing credit facilities on reasonable terms or at all. As the volume of loans that we make to customers increases, we may have to expand our borrowing capacity on our existing SPV facilities or add new sources of capital. If the underlying collateral does not perform as expected, our access to the SPV facilities could be reduced or eliminated. The availability of these financing sources depends on many factors, some of which we cannot control. In the event of a sudden shortage of funds in the banking system or capital markets, we may not be able to maintain necessary levels of funding without incurring high funding costs, suffering a reduction in the term of funding instruments, or having to liquidate certain assets. If our cost of borrowing increases or we are unable to arrange new methods of financing on favorable terms, we may have to curtail our origination of loans, which could have a material adverse effect on our results of operations or financial condition.

We may be unable to protect our proprietary technology and analytics or keep up with that of our competitors.

The success of our business depends to a significant degree upon the protection of our proprietary technology, including Curo, our IT platform, which we use for pricing and underwriting loans. We seek to protect our intellectual property with nondisclosure agreements with third parties and employees and through standard measures to protect trade secrets. We also implement cybersecurity policies and procedures to prevent unauthorized access to our systems and technology. However, we may be unable to deter misappropriation of our proprietary information, detect unauthorized use or take appropriate steps to enforce our

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intellectual property rights. We do not have agreements with all of our employees requiring them to assign to us proprietary rights to technology developed in the scope of employment. Additionally, while we have registered trademarks and pending applications for trademark registration(s), we do not own any patents or copyrights with respect to our intellectual property.

If a competitor learns our trade secrets (especially with regard to our marketing and risk management capabilities), if a third-party reverse engineers or otherwise uses our proprietary technology, or if an employee makes commercial use of the technology he or she develops for us, our business will be harmed. Pursuing a claim against a third-party or employee for infringement would be costly and our efforts may not be successful. If we are unable to protect our intellectual property, our competitors would have an advantage over us.

Our risk management efforts may not be effective.

We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk and other market-related risks, as well as well as regulatory and operational risks related to our business, assets and liabilities. Our risk management policies, procedures and techniques may not be sufficient to identify all of the risks we are exposed to, mitigate the risks we have identified or identify concentrations of risk or additional risks to which we may become subject in the future.

If a third party cannot provide us products, services or support, it could disrupt our operations or reduce our revenue.

Some of our lending activity depends on support we receive from third parties, including lenders who make loans to our customers under CSO programs and other third parties that provide services to facilitate lending, loan underwriting and payment processing. We also use third parties to support and maintain certain of our communication and information systems. If our relationship with any of these third parties end and we are unable to replace them or if they do not maintain quality and consistency in their services, we could lose customers which would substantially decrease our revenue and earnings.

In Texas, we rely on third-party lenders to conduct business. Regulatory actions can materially and adversely affect our third-party product offerings.

In Texas, we currently operate as a CSO or a CAB, arranging for unrelated third-parties to make loans to our customers. There are a limited number of third-party lenders that make these types of loans and there is significant demand and competition for the business of these companies. These third parties rely on borrowed funds to make consumer loans. If they lose their ability to make loans or become unwilling to make loans to us and we cannot find another lender, we would be unable to continue offering loans in Texas as a CSO or CAB, which would adversely affect our results of operations or financial condition.

Our core operations are dependent upon maintaining relationships with banks and other third-party electronic payment solutions providers. Any inability to manage cash movements through the banking system or the Automated Clearing House (“ACH”) system would materially impact our business.

We maintain relationships with commercial banks and third-party payment processors who provide a variety of treasury management services including depository accounts, transaction processing, merchant card processing, cash management and ACH processing. We rely on commercial banks to receive and clear deposits, provide cash for our store locations, perform wire transfers and ACH transactions and process debit card transactions. We rely on the ACH system to deposit loan proceeds into customer accounts and to electronically withdraw authorized payments from those accounts. It has been reported that U.S. federal regulators have taken or threatened actions, commonly referred to as “Operation Choke Point,” intended to discourage banks and other financial services providers from providing access to banking and third-party payment processing services to lenders in our industry. Additionally, legislation called the "Fair Access to Financial Services Act of 2020" has not yet been enacted and implemented. We can give no assurances that actions akin to Operation Choke Point will not intensify or resume, or that the effect of such actions against banks and/or third-party payment processors will not pose a threat to our ability to maintain relationships with commercial banks and third-party payment processors. The failure or inability of retail banks and/or payment providers to continue to provide services to us could adversely affect our operations.

Improper disclosure of customer personal data could result in liability and harm our reputation. Our costs could increase as we seek to minimize or respond to cybersecurity risks and security breaches.

We store and process large amounts of personally identifiable information, including sensitive customer information. While we believe that we maintain adequate policies and procedures, including antivirus and malware software and access controls, and use appropriate safeguards to protect against attacks, it is possible that our security controls over personal data and our employee training may not prevent improper disclosure of personally identifiable information. Such disclosure could harm our reputation and subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue.

We are subject to cybersecurity risks and security breaches which could result in the unauthorized disclosure or appropriation of customer data. We may not be able to anticipate or implement effective preventive measures against these types of breaches, especially because the techniques change frequently or are not recognized until launched. We may need to expend significant

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resources to protect against security breaches or to address problems caused by breaches. Actual or anticipated attacks and risks may increase our expenses, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. Our protective measures also could fail to prevent a cyber-attack and the resulting disclosure or appropriation of customer data. A significant data breach could harm our reputation, diminish customer confidence and subject us to significant legal claims, any of which may have a material adverse effect on us.

A successful penetration of our systems could cause serious negative consequences, including significant disruption of our operations, misappropriation of our confidential information or that of our customers or damage to our computers or systems or those of our customers and counterparties, and could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation exposure and harm to our reputation, all of which could have a material adverse effect on us. In addition, our applicants provide personal information, including bank account information when applying for loans. We rely on encryption and authentication technology licensed from third parties to provide the security and authentication to effectively secure transmission of confidential information. The technology we use to protect transaction data may be compromised due to advances in computer capabilities, new discoveries in cryptography or other developments. Data breaches can also occur because of non-technical issues.

Our servers are also vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, including “denial-of-service” type attacks. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. Security breaches, including any breach of our systems or unauthorized release of consumers’ personal information, could damage our reputation and expose us to litigation and possible liability.

As part of our business, and subject to applicable privacy laws, we may share confidential customer information and proprietary information with vendors, service providers and business partners who provide products, services or support to us. The information systems of these third parties may also be vulnerable to any of the above cyber risks or security breaches, and we may not be able to ensure that these third parties have adequate security controls in place to protect the information that we share with them. If our proprietary or confidential customer information is intercepted, stolen, misused or mishandled while in possession of a third party, it could result in reputational harm to us, loss of customers and suppliers, additional regulatory scrutiny and it could expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition and liquidity. Although we maintain insurance that is intended to cover certain losses from such events, there can be no assurance that such insurance will be adequate or available.

In addition, federal and some state regulators have implemented, or are considering implementing, rules and standards to address cybersecurity risks and many U.S. states have already enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures are costly to implement and may lead to widespread negative publicity, which may cause customers to lose confidence in the effectiveness of our data security measures.

If the information provided by customers to us is inaccurate, we may misjudge a customer’s qualification to receive a loan, which may adversely affect our results of operations.

A significant portion of our underwriting activities and our credit extension decisions are made online. We rely on certain third-party vendors in connection with verifying application data related to loans originated online. Any error or failure by a third-party vendor in verifying the information may cause us to originate loans to borrowers that do not meet our underwriting standards. From time to time in the past, these checks have failed and there is a risk that these checks could also fail in the future. We cannot be certain that every loan is made in accordance with our underwriting standards. Variances in underwriting standards could expose us to greater delinquencies and credit losses than we have historically experienced.

In addition, in deciding whether to extend credit or enter into other transactions with customers, we rely heavily on information provided by customers, counterparties and other third parties, including credit bureaus and data aggregators, and we further rely on representations of customers and counterparties as to the accuracy and completeness of that information. If a significant percentage of our customers were to intentionally or negligently misrepresent any of this information, or provide incomplete information, and our internal processes were to fail to detect such misrepresentations in a timely manner, we could end up approving a loan that, based on our underwriting criteria, we would not have otherwise made. As a result, our earnings and our financial condition could be negatively impacted.

Employee misconduct could harm us by subjecting us to monetary loss, legal liability, regulatory scrutiny and reputational harm.

Our reputation is crucial to maintaining and developing relationships with existing and potential customers and third parties with whom we do business. There is a risk that our employees could engage in misconduct that adversely affects our business. For example, if an employee were to engage—or be accused of engaging—in illegal or suspicious activities, including fraud or theft, we could be subject to regulatory sanctions and suffer significant harm to our reputation, financial condition, customer relationships and ability to attract future customers or employees. Employee misconduct could prompt regulators to allege or to determine, based upon such misconduct, that we have not established adequate supervisory systems and procedures to inform

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employees of applicable rules or to detect and deter violations of such rules. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent misconduct may not be effective in all cases. Misconduct by our employees, or even unsubstantiated allegations, could result in a material adverse effect on our reputation and our business.

Risks Relating to Our Industry

The CFPB authority over U.S. consumer lending could have a significant impact on our U.S. business.

The CFPB regulates U.S. consumer financial products and services, including consumer loans offered by us. The CFPB has regulatory, supervisory and enforcement powers over providers of consumer financial products and services.

The CFPB has examined our lending products, services and practices, and we expect the CFPB will continue to examine us. CFPB examiners have the authority to require quarterly monitoring, inspect our books and records and probe our business practices, and its examination includes review of marketing activities; loan application and origination activities; payment processing activities and sustained use by consumers; collections, accounts in default and consumer reporting activities as well as third-party relationships. As a result of these examinations of us or other parties, we could be required to change our products, services or practices, or we could be subject to monetary penalties, which could materially adversely affect us. Beginning in the fourth quarter of 2021, we are required to submit certain information regarding our business to the CFPB on a quarterly basis.

The CFPB also has broad authority to prohibit unfair, deceptive or abusive acts or practices and to investigate and penalize financial institutions. In addition to assessing financial penalties, the CFPB can require remediation of practices, pursue administrative proceedings or litigation and obtain cease and desist orders (which can include orders for restitution or rescission or reformation of contracts). Also, if a company has violated Title X of the Dodd-Frank Act or related CFPB regulations, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to remedy violations. If the CFPB or state attorneys general or state regulators believe that we have violated any laws or regulations, they could exercise their enforcement powers which could have a material adverse effect on our business, prospects, results of operations, financial condition or cash flows.

The CFPB's Final Payday Rule, if implemented in its current form, could negatively affect our U.S. consumer lending business.

On July 7, 2020, the CFPB issued the 2020 Final Rule, which rescinded part of the 2017 Final CFPB Payday Rule requiring enhanced underwriting and an "ability-to-repay" analysis; but kept intact the payment provisions around debiting consumer accounts. The 2017 Final CFPB Payday Rule is currently stayed as a result of an industry legal challenge and the effective date of the payment provisions is unknown. In light of this industry challenge, we cannot predict when it will ultimately go into effect or quantify its potential effect on us. If the payment provisions of the 2017 Final CFPB Payday Rule become effective in the current form, we will need to make changes to our payment processes and customer notifications in our U.S. consumer lending business. If we are not able to make all of these changes successfully, the payment provisions of the 2017 Final CFPB Payday Rule could have a material adverse impact on our business, prospects, results of operations, financial condition and cash flows. Refer to Business—Regulatory Environment and Compliance—U.S. Regulations—U.S. Federal Regulations— CFPB Rules."

Following the Seila Law Supreme Court decision, President Biden requested and received the CFPB director's resignation and replaced her with an Acting Director. President Biden's nomination for the CFPB's next director, Rohit Chopra, who was confirmed by the Senate in October of 2021, is expected to enhance the CFPB's supervisory and enforcement regime.

Our industry is highly regulated. Existing and new laws and regulations could have a material adverse effect on our results of operations or financial condition and failure to comply with these laws and regulations could subject us to various fines, civil penalties and other relief.

In the U.S. and Canada, our business is subject to a variety of statutes and regulations enacted at the federal, state, provincial and municipal levels. Accordingly, regulatory requirements, and the actions we must take to comply with regulations, vary considerably by jurisdiction. Managing this complex regulatory environment requires considerable compliance efforts. It is costly to operate in this environment, and it is possible that those costs will increase materially over time. This complexity also increases the risks that we will fail to comply with regulations which could have a material adverse effect on our results of operations or financial condition. These regulations affect our business in many ways, and include regulations relating to:

•the terms of loans (such as interest rates, fees, durations, repayment terms, maximum loan amounts, renewals and extensions and repayment plans), the number and frequency of loans and reporting and use of state-wide databases;

•underwriting requirements;

•collection and servicing activity, including initiation of payments from consumer accounts;

•the establishment and operation of CSOs or CABs;

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•licensing, reporting and document retention;

•unfair, deceptive and abusive acts and practices and discrimination;

•disclosures, notices, advertising and marketing;

•loans to members of the military and their dependents;

•insurance products;

•requirements governing electronic payments, transactions, signatures and disclosures;

•check cashing;

•money transmission;

•currency and suspicious activity recording and reporting;

•privacy and use of personally identifiable information and consumer data, including credit reports;

•anti-money laundering and counter-terrorist financing;

•posting of fees and charges; and

•repossession practices in certain jurisdictions where we operate as a title lender.

These regulations affect the entire life cycle of our customer relationships and compliance with the regulations affects our loan volume, revenues, delinquencies and other aspects of our business, including our results of operations. We expect that regulation of our industry will continue and that laws and regulations currently proposed, or other future laws and regulations, will be enacted and will adversely affect our pricing, product mix, compliance costs or other business activities in a way that is detrimental to our results of operations or financial condition.

In recent years, California, Ohio and Virginia adopted lending laws that had a significant adverse impact on our business. For a description of these significant impacts, see Item 1, “Business—Regulatory Environment and Compliance—U.S. Regulations—

U.S. State and Local Regulations—Recent and Potential Future Changes in the Law” for additional details. We may not be able to implement a strategy to replace our products in these states, or, if we do, that those replacement products will be free from legal attack. Failing to successfully manage product transitions would have a material adverse effect on our results of operations or financial condition.

Several municipalities have passed laws that regulate aspects of our business, such as zoning and occupancy regulations to limit consumer lending storefronts. Similarly, nearly 50 Texas municipalities have enacted ordinances that regulate products offered under our CAB programs, including loan sizes and repayment terms. The Texas ordinances have forced us to make substantial changes to the loan products we offer and have resulted in litigation initiated by the City of Austin challenging the terms of our modified loan products. See Item 1, "Business—Regulatory Environment and Compliance—U.S. Regulations— State" and Note 8, “Commitments and Contingencies." If additional local laws are passed that affect our business, this could materially restrict our business operations, increase our compliance costs or increase the risks associated with our regulatory environment.

There are a range of penalties that governmental entities could impose if we fail to comply with the various laws and regulations that apply to us, including:

•ordering corrective actions, including changes to compliance systems, product terms and other business operations;

•imposing fines or other monetary penalties, which could be substantial;

•ordering restitution, damages or other amounts to customers, including multiples of the amounts charged;

•requiring disgorgement of revenues or profits from certain activities;

•imposing cease and desist orders, including orders requiring affirmative relief, targeting specific business activities;

•subjecting our operations to monitoring or additional regulatory examinations during a remediation period;

•revoking licenses required to operate in particular jurisdictions; and/or

•ordering the closure of one or more stores.

Accordingly, if we fail to comply with applicable laws and regulations, it could have a material adverse effect on our results of operations or financial condition.

Our insurance operations are subject to a number of risks and uncertainties.

Heights’ customers can either purchase optional insurance products, including credit life, credit accident and health, credit property insurance and credit involuntary unemployment insurance, through a third-party independent insurer and finance the premiums with their loan from Heights, or customers may purchase their own insurance naming Heights as a “loss payee” and provide proof of insurance to Heights.

When purchased by a customer, Heights' credit insurance products insure the customer’s payment obligations on the associated loan in the event the customer is unable to make monthly payments due to death, disability, or involuntary unemployment, or in the event of a casualty event associated with the underlying collateral. Although a customer can pay the associated premiums

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separately, substantially all customers finance payment of the premium, with the financed premium included in the balance of the loan. A credit insurance product may be cancelled if, for example, (i) we request cancellation due to the customer’s default on obligations under the associated loan, (ii) the customer prepays the principal balance of the associated loan in full, or (iii) the customer elects to terminate the credit insurance prior to the expiration of the term thereof (which the customer may do at any time).

Our insurance operations are subject to a number of risks and uncertainties, including changes in laws and regulations, customer demand for insurance products, claims experience and insurance carrier relationships. Changes to laws or regulations may, for example, negatively impact our ability to offer one or more of our insurance products; the way we are permitted to offer such products; capital and reserve requirements; the frequency and type of regulatory monitoring and reporting to which we are subject; benefits or loss ratio requirements; and insurance producer and agent licensing or appointment requirements. In addition, because our customers are not required to purchase the credit insurance products that we offer, we cannot be certain that customer demand for credit insurance products will not decrease in the future. Our insurance operations are also dependent on our lending operations as the sole source of business and product distribution. If our lending operations discontinue offering insurance products, our insurance operations would have no method of distribution. Insurance claims and policyholder liabilities are also difficult to predict and may exceed the related reserves set aside for claims and associated expenses for claims adjudication.

We are also dependent on the continued willingness of unaffiliated third-party insurance companies to participate in the credit insurance market and we cannot be certain that the credit insurance market will remain viable in the future. Further, if our insurance providers are, for any reason, unable or unwilling to meet claims and premium reimbursement payment obligations or premium ceding obligations, we could be subject to increased net credit losses, regulatory scrutiny, litigation and other losses and expenses.

If any of these events, risks, or uncertainties were to occur or materialize, it could have a material adverse effect on our business, financial condition and results of operations and cash flows.

Our stock price, reputation and financial results could be adversely affected by media and public perception of our credit products.

Consumer advocacy groups and various media outlets continue to criticize alternative financial services providers. These critics often characterize such alternative financial services providers as predatory or abusive toward consumers. If these persons were to criticize the products that we offer, it could negatively impact our relationships with existing borrowers and our ability to attract new borrowers and generate dissatisfaction among our employees.

Litigation, including class actions, and administrative proceedings against us or our industry could have a material adverse effect on our results of operations, cash flows or financial condition.

We have been the subject of administrative proceedings and lawsuits, as well as class actions, in the past, and may be involved in future proceedings, lawsuits or other claims. See Item 1, "Business—Regulatory Environment and Compliance— U.S. Regulations—U.S. and State" and Note 8, “Commitments and Contingencies” for a description of material litigation. Other companies in our industry have also been subject to litigation, class action lawsuits and administrative proceedings regarding the offering of consumer loans and the resolution of those matters could adversely affect our business. We anticipate that lawsuits and enforcement proceedings involving our industry, and potentially involving us, will continue to be brought.

We may incur significant expenses associated with the defense or settlement of lawsuits. The adverse resolution of legal or regulatory proceedings could force us to refund fees and interest collected, refund the principal amount of advances, pay damages or monetary penalties or modify or terminate our operations in particular jurisdictions. The defense of such legal proceedings, even if successful, is expensive and requires significant time and attention from our management. Settlement of proceedings may also result in significant cash payouts, foregoing future revenues and modifications to our operations. Additionally, an adverse judgment or settlement could result in the termination, non-renewal, suspension or denial of a license required for us to do business in a particular jurisdiction (or multiple jurisdictions). A sufficiently serious violation of law in one jurisdiction or with respect to one product could have adverse licensing consequences in other jurisdictions and/or with respect to other products. Thus, legal and enforcement proceedings could have a material adverse effect on our business, future results of operations, financial condition or our ability to service our debt obligations.

Judicial decisions or new legislation could potentially render our arbitration agreements unenforceable.

We include arbitration provisions in our customer loan agreements. Arbitration provisions require that disputes with be resolved through individual arbitration rather than in court. Thus, our arbitration provisions, if enforced, have the effect of shielding us from class action liability. The effectiveness of arbitration provisions depends on whether courts will enforce these provisions. A number of courts, including the California and Nevada Supreme Courts, have concluded that arbitration agreements with class action waivers are unenforceable, particularly where a small dollar amount is in controversy on an individual basis. If our

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arbitration provisions are found to be unenforceable, our costs to litigate and settle customer disputes could increase and we could face class action lawsuits, with a potential material adverse effect on our results of operations or financial condition.

The profitability of our bank-originated products could be adversely affected by the originating lenders.

We do not originate nor control the pricing or functionality of Unsecured Installment loans originated by a bank and other bank sponsored products, such as Revolve Finance and First Phase. We have agreements with third party banks that license our technology and underwriting services and that make all key decisions regarding the underwriting, product features and pricing. We generate revenues from these products through marketing, servicing and technology licensing fees, as well as, at times, through our participating interest, depending on the product. If a bank changes its pricing, underwriting or marketing of the product in a way that decreases revenues or increases losses, then the profitability could be reduced, which could have a material adverse effect on our business, prospects, results of operations, financial condition or cash flows. If our relationship with a bank ended, we may not be able to find another suitable replacement bank and new arrangements, if any, may result in significantly increased costs to us. Any inability to find another bank would adversely affect our ability to continue to facilitate the bank-originated products, which in turn could have a material adverse effect on our business, prospects, results of operations, financial condition or cash flows.

Risk Factor Relating to our Investment in Katapult

Our operating results may be adversely affected by our investment in Katapult.

As of December 31, 2021, we owned 25.2% of Katapult on a fully diluted basis assuming full pay-out of earn-out shares. We apply the equity method of accounting to certain shares of common stock and interests that qualify as in-substance common stock. We recognize our share of Katapult's income or losses on a one-quarter lag related to the equity method investment. We made a $10 million investment in December 2021 to increase the investment to 25.2%. We cannot provide assurance that our investment will (i) increase or maintain its value, or (ii) that we will not incur losses from the holding of such investments.

General Risk Factors

We may fail to meet our publicly announced guidance or other expectations about our business and future operating results which would cause our stock price to decline.

We may provide guidance about our business and future operating results. In developing this guidance, we make certain assumptions and judgments about our future performance, which are difficult to predict. Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. The assumptions used or judgments applied to our operations to project future operating and financial results may be inaccurate and could result in a material reduction in the price of our common stock, which we have experienced in the past. Our business results may also vary significantly from our guidance or our analyst’s consensus due to a number of factors which are outside of our control and which could adversely affect our operations and financial results. Furthermore, if we make downward revisions of previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors or other interested parties, the price of our common stock could decline.

The market price of our common stock may be volatile.

The stock market is highly volatile. As a result, the market price and trading volume for our stock may also be highly volatile, and investors may experience a decrease in the value of their shares, which may be unrelated to our operating performance or prospects. Factors that could cause the market price of our common stock to fluctuate significantly include:

•our operating and financial performance and prospects and the performance of competitors;

•our quarterly or annual earnings or those of competitors;

•conditions that impact demand for our products and services;

•our ability to accurately forecast our financial results;

•changes in earnings estimates or recommendations by securities or research analysts who track our common stock;

•market and industry perception of our level of success in pursuing our growth strategy;

•strategic actions by us or our competitors, such as acquisitions or restructurings;

•changes in laws and regulations;

•changes in accounting standards, policies, guidance, interpretations or principles;

•arrival or departure of members of senior management or other key personnel;

•the number of shares that are publicly traded;

•sales of common stock by us, our investors or members of our management team;

•unfavorable or misleading information published by securities or industry analysts;

•factors affecting the industry in which we operate, including competition, innovation, regulation and the economy; and

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•changes in general market, economic and political conditions, including those resulting from natural disasters, health emergencies (such as COVID-19), telecommunications failures, cyber-attacks, civil unrest, acts of war, terrorist attacks or other catastrophic events.

Any of these factors may result in large and sudden changes in the trading volume and market price of our common stock and may prevent you from being able to sell your shares at or above the price you paid for them. Following periods of volatility, stockholders may file securities class action lawsuits. Securities class action lawsuits are costly to defend and divert management’s attention and, if adversely determined, could involve substantial damages that may not be covered by insurance.

Our business could suffer as the result of the loss of the services of our senior executives or if we cannot attract and retain talented employees.

We compete with other companies both within and outside of our industry for talented employees. If we cannot recruit, train, develop, and retain sufficient numbers of talented employees, particularly in light of our growth plans, we could experience increased turnover, decreased customer satisfaction, operational challenges, low morale, inefficiency or internal control failures. Insufficient numbers of talented employees, particularly IT developers, could also limit our ability to grow and expand our businesses. Labor shortages could also result in higher wages that would increase our labor costs, which could reduce our profits. In addition, the efforts and abilities of our senior executives are important elements of maintaining our competitive position and driving future growth, and the loss of the services of one or more of our senior executives could result in challenges executing our business strategies or other adverse effects on our business.

The original founders of the company ("Founders") own a significant percentage of our outstanding common stock and their interests may conflict with ours or yours in the future.

At December 31, 2021, the Founders owned 41.5% of our outstanding common stock and each is a member of our Board of Directors. Accordingly, the Founders collectively can exert control over many aspects of our company, including the election of directors. The Founders interests may not in all cases be aligned with your interests. On January 28, 2022, Doug Rippel, co-founder and Executive Chairman of the Board, tendered his resignation from the Board to be effective immediately following the Company’s annual meeting of shareholders in 2022.

Provisions in our charter documents could discourage a takeover that stockholders may consider favorable.

Certain provisions in our governing documents could make a merger, tender offer or proxy contest involving us difficult, even if such events would be beneficial to your interests. Among other things, these provisions:

•permit our Board of Directors to set the number of directors and fill vacancies and newly-created directorships;

•authorize “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan;

•provide that our Board of Directors is authorized to amend or repeal any provision of our bylaws;

•restrict the forum for certain litigation against us to Delaware;

•establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings;

•require that actions to be taken by our stockholders be taken only at an annual or special meeting of our stockholders, and not by written consent; and

•establish certain limitations on convening special stockholder meetings.

These provisions may delay or prevent attempts by our stockholders to replace members of our management by making it more difficult for stockholders to replace members of our Board of Directors. These provisions also may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their common stock. We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers or investors aiming to effect changes in management to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any proposal. However, such anti-takeover provisions could also depress the price of our common stock by acting to delay or prevent a change in control.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

The choice of forum provision in our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes with stockholders. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may discourage many types of lawsuits.

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ITEM 1B.     UNRESOLVED STAFF COMMENTS

None.

ITEM 2.         PROPERTIES

As of December 31, 2021, we leased 550 stores in the U.S. and 201 stores in Canada. Our U.S. stores include 390 branches from the acquisition of Heights, which we acquired on December 27, 2021. We lease our principal executive offices, which are located in Wichita, Kansas. We also lease administrative offices in Greenville, South Carolina and Toronto, Ontario and a FinTech office in Chicago, Illinois. Our centralized collections facilities are in the U.S. and Canada. See Note 12, "Leases" of the Notes to Consolidated Financial Statements for additional information on our operating leases with real estate entities that are related to us through common ownership.

ITEM 3.         LEGAL PROCEEDINGS

See Note 8, "Commitments and Contingencies" of the Notes to Consolidated Financial Statements for a summary of our legal proceedings and claims.

ITEM 4.         MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5.         MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The principal market for our common stock is the NYSE and our shares of common stock are listed under the symbol "CURO."

As of March 3, 2022, there were approximately 130 stockholders of record of our common stock. Holders of record do not include an indeterminate number of beneficial holders whose shares are held through brokerage accounts and clearing agencies.

Dividends

Our Board of Directors approved a quarterly dividend program in 2020 for $0.055 per share ($0.22 annualized), which was increased to $0.11 per share in May of 2021 ($0.44 annualized). In February 2022, the Board also approved an $0.11 per share quarterly dividend for the calendar year 2022. Our Board of Directors has discretion to determine whether to pay dividends in the future based on a variety of factors, including our earnings, cash flow generation, financial condition, results of operations, the terms of our indebtedness and other contractual restrictions, capital requirements, business prospects and other factors our Board of Directors may deem relevant.

Issuer Purchases of Equity Securities

In May 2021, our Board of Directors authorized a share repurchase program (the "2021 Repurchase Program") providing for the repurchase of up to $50.0 million of our common stock.

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The following table provides information with respect to purchases we made of our common stock during the quarter ended December 31, 2021.

Period	Total Number of Shares Purchased(1)(2)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3)	Dollar Value of Shares that may yet be Purchased under the Plans or Programs(4) (in millions)
October 2021	287,398	$	18.33	286,629	$	27.1
November 2021	794,943	18.01		294,266	21.8
December 2021	843,567	16.25		568,385	12.6
Total	1,925,908	$	17.28	1,149,280
(1) Includes shares withheld from employees as tax payments for shares issued under our stock-based compensation plans. See Note 11, "Share-based compensation" of the Notes to the Consolidated Financial Statements for additional details on our stock-based compensation plans.
(2) Includes shares repurchased in a private transaction. See Note 23, "Share Repurchase Program" of the Notes to the Consolidated Financial Statements for additional details.
(3) All shares purchased as part of a publicly announced plan were purchased under the 2021 Repurchase Program, described in this Item 5.
(4) As of the end of the period.

In February 2022, we completed our purchases under the 2021 Repurchase Program. Refer to Note 24, "Subsequent Events" for additional details.

In February 2022, our Board authorized a new share repurchase program for up to $25.0 million of our common stock. Repurchases under this program will commence at our discretion and continue until completed or terminated. We expect the purchases to be made from time-to-time in the open market and/or in privately negotiated transactions at our discretion, subject to market conditions and other factors. Any repurchased shares will be available for use in connection with equity plans and for other corporate purposes.

ITEM 6.     [RESERVED]

ITEM 7.         MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of financial condition, result of operations, liquidity and capital resources and certain factors that may affect future results, including economic and industry-wide factors, should be read in conjunction with our Consolidated Financial Statements and accompanying notes included herein.

Components of Our Results of Operations

Revenue

The core consumer finance products we offer include Revolving LOC and Installment loans. Revenue in our Consolidated Statements of Operations includes: interest income, MDR, finance charges, CSO fees, insurance revenue, late fees and non-sufficient funds fees. Product offerings differ by jurisdiction and are governed by the laws in each jurisdiction.

Revolving LOC loans are lines of credits without specified maturity dates and include our POS financing products at Flexiti. We record revenue from Revolving LOC loans on a simple-interest basis. Revolving LOC revenues include interest income on outstanding revolving balances and other usage or maintenance fees as permitted by underlying statutes. Accrued interest and fees are included in "Gross loans receivable" in the Consolidated Balance Sheets. Revolving LOC revenues also include MDR, which represents a fee charged to merchant partners to facilitate customer purchases at merchant locations. The fee is recorded as unearned revenue when received and recognized over the expected loan term.

Historically, Installment loans range from unsecured, short-term, small-denomination loans, whereby a customer receives cash in exchange for a post-dated personal check or pre-authorized debit from the customer's bank account, to fixed-term, fully amortizing loans with a fixed payment amount due each period during the term of the loan. With the acquisition of Heights in December 2021, we now offer long-term large loans to customers. For our short-term, small denomination loans, we recognize revenue on a constant-yield basis ratably over the team of each loan. We defer and recognize unearned fees over the remaining term of the loan at the end of each reporting period. Revenues from these short-term loans represent deferred presentment or other fees as defined by the underlying state, provincial, or national regulations. For our fixed-term, fully amortizing loans, we record revenues on a simple-interest basis. Revenue for fixed-term Installment loans includes interest income from Company-Owned loans, CSO fees, and non-sufficient funds or returned-items fees on late or defaulted payments on past-due loans, known as late fees. Late fees comprise less than 1% of Installment revenues. Accrued interest and fees are included in "Gross loans receivable" in the Consolidated Balance Sheets.

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We also provide a number of ancillary financial products, including optional credit protection insurance, check cashing, demand deposit accounts, and money transfer services. Heights offers optional insurance products to its customers in connection with its lending operations, including credit life, credit accident and health, credit property insurance and credit involuntary unemployment insurance with the policies written by unaffiliated third-party insurance companies. Insurance commissions, written in connection with certain loans, are credited to unearned insurance commissions and recognized as income over the life of the related insurance contracts, using a method similar to that used for the recognition of interest income.

Provision for Losses

Credit losses are an inherent part of outstanding loans receivable. We maintain an allowance for loan losses for loans and interest receivable at a level estimated to be adequate to absorb such losses based primarily on our analysis of historical loss rates by products containing similar risk characteristics. The allowance for losses on our Company-Owned gross loans receivables reduces the outstanding gross loans receivables balance in the Consolidated Balance Sheets. The liability for estimated incurred losses related to loans originated by third-party lenders through CSO programs, which we guarantee but do not include in the Consolidated Financial Statements (referred to as "Guaranteed by the Company"), is reported in "Liability for losses on CSO lender-owned consumer loans" in the Consolidated Balance Sheets. Increases in either the allowance or the liability, net of charge-offs and recoveries, are recorded as “Provision for losses” in the Consolidated Statements of Operations.

Operating Expense

Our primary categories of operating expense are as follows:

•Salaries and Benefits—includes salaries and personnel-related costs, including benefits, bonuses and share-based compensation expense for both store and corporate costs.

•Occupancy—includes rent expense on our leased facilities and equipment, utilities, insurance and certain maintenance expenses for both store and corporate costs.

•Advertising—costs are expensed as incurred and include costs associated with attracting, retaining and/or reactivating customers as well as creating brand awareness. We have internal creative, web and print design capabilities and if we outsource these services, it is limited to mass-media production and placement. Advertising expense also includes costs for all marketing activities including paid search, advertising on social networking sites, affiliate programs, direct response television, radio air time and direct mail.

•Direct Operations—includes expenses associated with the direct operations and technology infrastructure related to loan underwriting, collections and processing, and bank service charges and credit scoring charges.

•Depreciation and amortization—includes all store and corporate depreciation and amortization expense.

•Other operating expense—includes expenses such as office expense, security expense, travel and entertainment expenses, certain taxes, legal and professional fees, foreign currency impact to our intercompany balances, gains or losses on foreign currency exchanges, disposals of fixed assets, certain store closure costs, and other miscellaneous income and expense amounts.

Other Expense

Our non-operating expenses include the following:

•Interest Expense—includes interest primarily related to our Senior Secured Notes, our SPV and SPE facilities, and our Senior Revolver.

•Income or loss from equity method investment and Gain from equity method investment - includes our share of Katapult's income or loss and a recognized gain from the merger of Katapult and FinServ. Refer to Item 1, "Business—Company History and Overview" and Note 6, "Fair Value Measurements" of the Notes to the Consolidated Financial Statements for additional details on our equity method investment.

•Loss on extinguishment of debt - includes costs associated with the extinguishment of debt facilities.

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Revenue by Product and Segment and Related Loan Portfolio Performance

Consolidated Revenue by Product and Segment

The following table summarizes revenue by product, including CSO fees, for the period indicated:

	For the Year Ended
	December 31, 2021						December 31, 2020
(in thousands, unaudited)	U.S.	Canada Direct Lending	Canada POS Lending	Total	% of Total		U.S.	Canada Direct Lending	Canada POS Lending	Total	% of Total
Revolving LOC	$ 106,302	$ 156,000	$ 32,289	$ 294,591	36.0	%	$ 134,449	$ 115,053	$ —	$ 249,502	29.4	%
Installment	405,409	43,735	—	449,144	54.9	%	489,057	49,628	—	538,685	63.6	%
Ancillary	14,251	57,304	2,553	74,108	9.1	%	15,018	44,191	—	59,209	7.0	%
Total revenue	$ 525,962	$ 257,039	$ 34,842	$ 817,843	100.0	%	$ 638,524	$ 208,872	$ —	$ 847,396	100.0	%

For the year ended December 31, 2021, total revenue declined $29.6 million, or 3.5%, to $817.8 million, compared to the prior year. Excluding Runoff Portfolios, total revenue for the year ended December 31, 2021 increased $33.7 million, or 4.6%, compared to the prior year. Geographically, U.S. revenues declined 17.6% year over year (9.5% excluding Runoff Portfolios) largely due to COVID-19 Impacts, while Canada Direct Lending revenues increased 23.1% due to the continued popularity and growth of Revolving LOC loans. For the year ended December 31, 2021, Canada POS Lending revenue was $34.8 million, inclusive of acquisition-related adjustments which reduced total revenue by $7.5 million.

Canada POS Lending revenue includes MDR, which is recognized over the life of the underlying loan term. On March 10, 2021, we completed the acquisition of Flexiti. For the year ended December 31, 2021, Canada POS Lending results were impacted by adjustments related to that acquisition that reduced revenue by $7.5 million and net revenue by $13.9 million ("acquisition-related adjustments"). The acquisition included a loan portfolio with a fair value of approximately $196.1 million ("Acquired Portfolio"). A fair value discount of $12.5 million was based on estimated future net cash flows and is recognized in net revenue over the expected life of the Acquired Portfolio (approximately 12 months). This amortization resulted in an increase in revenue of $6.6 million and loan loss provision of $6.4 million for the year ended December 31, 2021. The Acquired Portfolio also included $14.1 million of unearned MDR and annual and administrative fees, which are not amortized to revenue for the Acquired Portfolio because they do not represent future cash flows. For the year ended December 31, 2021, Canada POS Lending revenue and net revenue were both lower by $14.1 million compared to what would have been reported if the unearned MDR and fees had been recognized over the expected life of the Acquired Portfolio. The acquisition-related adjustments related to the unearned MDR annual and administrative fees will decline each quarter, until becoming fully amortized by the end of the first quarter of 2022.

The table below presents acquisition-related adjustments to Flexiti's revenue and net revenue for the year ended December 31, 2021:

(in thousands, unaudited)	Canada POS Lending		Acquisition-related adjustments			Adjusted Canada POS Lending
Interest income	$	22,335	$	(6,614)	(1)	$	15,721
Other revenue	12,506		14,074		(2)	26,580
Total revenue	$	34,841	$	7,460		$	42,301
Provision for losses	24,638		(6,444)		(1)	18,194
Net revenue	$	10,203	$	13,904		$	24,107
(1) Acquisition-related adjustments for interest income and provision for losses relate to the amortization of the fair value discount of the Acquired Portfolio.
(2) Acquisition-related adjustments for other revenue represents the unearned MDR and annual and administrative fees, which were not included in the opening balance sheet as they did not represent future cash flows as of March 10, 2021, and thus, are not amortized to revenue for the Acquired Portfolio. The acquisition-related adjustments related to the unearned MDR and annual and administrative fees will decline each quarter with the Acquired Portfolio and will be fully amortized by the end of the first quarter of 2022.

From a product perspective, Revolving LOC revenues increased $45.1 million, or 18.1%, compared to the prior year, primarily due to growth in Canada Direct Lending revenue of $40.9 million, or 35.6%, and Canada POS Lending of $32.3 million, partially offset by declines in U.S. revenue of $28.1 million, or 20.9%. Excluding Runoff Portfolios, U.S. Revolving LOC revenue decreased $1.6 million, or 1.6%, for the year ended December 31, 2021 compared to the prior year.

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For the year ended December 31, 2021, Installment revenues decreased $89.5 million, or 16.6%, compared to the prior year. Excluding Runoff Portfolios, Installment revenue decreased $52.9 million, or 11.6%, primarily as a result of COVID-19 related constraints on demand and the continued shift to Revolving LOC loans.

Ancillary revenues increased $14.9 million, or 25.2%, versus the prior year from the sale of insurance products to Revolving LOC and Installment loan customers in Canada.

The following table summarizes revenue by product, including CSO fees, for 2020 and 2019 (in thousands):

	Year Ended
	December 31, 2020						December 31, 2019
	U.S.	Canada Direct Lending	Canada POS Lending	Total	% of Total		U.S.	Canada Direct Lending	Canada POS Lending	Total	% of Total
Revolving LOC	$ 134,449	$ 115,053	$ —	$ 249,502	29.4	%	$ 147,794	$ 97,462	$ —	$ 245,256	21.5	%
Installment	489,057	49,628	—	538,685	63.6	%	747,417	85,275	—	832,692	72.9	%
Ancillary	15,018	44,191	—	59,209	7.0	%	18,295	45,554	—	63,849	5.6	%
Total revenue	$ 638,524	$ 208,872	$ —	$ 847,396	100.0	%	$ 913,506	$ 228,291	$ —	$ 1,141,797	100.0	%

For a comparison of our results of operations for the years ended December 31, 2020 and 2019, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Revenue by Product and Segment and Related Loan Portfolio Performance" in Part II Item 7 of our 2020 Form 10-K.

The following table presents online revenue and online transaction compositions, including CSO fees, of the products and services that we currently offer within the U.S., excluding Heights, and Canada Direct Lending segments:

	Year Ended December 31,
	2021		2020
Online revenue as a percentage of consolidated revenue	50.5	%	48.5	%
Online transactions as a percentage of consolidated transactions	60.8	%	54.7	%

For the year ended December 31, 2021, online revenue as a percentage of consolidated revenue increased as a result of our store closures during the second and third quarters of 2021, as well as the continued transition of customers to our online channel.

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Loan Volume and Portfolio Performance Analysis

The following table reconciles Company Owned gross loans receivable, a GAAP-basis balance sheet measure, to Gross combined loans receivable, a non-GAAP measure(1). Gross combined loans receivables includes loans originated by third-party lenders through CSO programs, which are not included in our Consolidated Financial Statements but from which we earn revenue by providing a guarantee to the unaffiliated lender (in thousands):

		As of
(in thousands, unaudited)	December 31, 2021	September 30, 2021	June 30, 2021	March 31, 2021	December 31, 2020
U.S.
Revolving LOC	$ 52,532	$ 51,196	$ 47,277	$ 43,387	$ 55,561
Installment - Company Owned	609,413	137,987	139,234	142,396	167,890
Canada Direct Lending
Revolving LOC	402,405	366,509	337,700	319,307	303,323
Installment	24,792	24,315	23,564	24,385	26,948
Canada POS Lending
Revolving LOC	459,176	302,349	221,453	201,539	—
Company Owned gross loans receivable	$ 1,548,318	$ 882,356	$ 769,228	$ 731,014	$ 553,722
Gross loans receivable Guaranteed by the Company	46,317	43,422	37,093	32,439	44,105
Gross combined loans receivable (1)	$ 1,594,635	$ 925,778	$ 806,321	$ 763,453	$ 597,827
(1) See a description of non-GAAP Financial Measures in "Supplemental Non-GAAP Financial Information."

Gross combined loans receivable by product at quarter-end are presented below.

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Gross combined loans receivable increased $996.8 million, or 166.7%, to $1,594.6 million as of December 31, 2021, from $597.8 million as of December 31, 2020. Gross combined loans receivables as of December 31, 2021 included $196.1 million and approximately $472 million of receivables acquired on the date of acquisition of Flexiti and Heights, respectively. Canada POS Lending has continued to grow rapidly throughout the year, particularly beginning in July 2021 with Flexiti beginning its exclusive POS financing partnership with LFL. In addition, the holiday season drove $114.4 million of Canada POS Lending loan growth in November and December 2021. Excluding loans acquired in connection with the Flexiti acquisition on March 10, 2021 and the Heights acquisition on December 27, 2021, gross combined loans receivables increased $329.0 million, or 41.4%, from December 31, 2020 to December 31, 2021, primarily driven by Canada Direct Lending growth of $96.9 million, or 29.3%. During such period, U.S. gross combined loans receivable, excluding Heights, decreased $30.9 million, or 11.6%, primarily due to (i) COVID-19 Impacts and (ii) the aforementioned Runoff Portfolios. Excluding Runoff Portfolios and gross loans receivables acquired with Heights, U.S. gross combined loans receivable grew $24.3 million, or 12.6%, during such period.

Sequentially, gross combined loans receivable increased $668.9 million, or 72.2%. Geographically, U.S. grew sequentially by $475.7 million, or 204.5%, as a result of our acquisition of Heights, which accounted for approximately $472 million of loans receivable as of December 31, 2021. Canada grew sequentially by $193.2 million, or 27.9%, primarily driven by Canada POS Lending growth of $156.8 million, or 51.9%, and Canada Direct Lending Revolving LOC growth of $35.9 million, or 9.8%. Excluding Heights, gross combined loans receivable increased $197.2 million, or 21.3%, sequentially, as consumer demand increased in the fourth quarter.

Consolidated Results of Operations

Beginning in the year ended December 31, 2021, we changed our presentation of operating expenses on our Statements of Operations. The December 31, 2020 and December 31, 2019 presentations have been revised to conform to the current year presentation. Refer to the comparison of "Comparison of Consolidated Results of Operations for the Years Ended December 31, 2021 and 2020" below for a description of expenses included within each operating expense line item.

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The table below presents our consolidated results of operations. A further discussion of the results of our operating segments is provided under "—Segment Analysis" below.

(in thousands)

(in thousands, unaudited)	Year Ended December 31,
	2021	2020 (1)	2019 (1)
Revenue	$ 817,843	$ 847,396	$ 1,141,797
Provision for losses	245,668	288,811	468,551
Net revenue	572,175	558,585	673,246
Operating Expenses
Salaries and benefits	237,109	196,817	206,193
Occupancy	55,559	57,271	54,895
Advertising	38,762	44,552	53,398
Direct operations	60,056	46,893	73,568
Depreciation and amortization	26,955	17,498	18,630
Other operating expense	74,682	47,048	48,049
Total operating expenses	493,123	410,079	454,733
Other expense (income)
Interest expense	97,334	72,709	69,763
(Income) loss from equity method investment	(3,658)	(4,546)	6,295
Gain from equity method investment	(135,387)	—	—
Loss on extinguishment of debt	40,206	—	—
Total other (income) expense	(1,505)	68,163	76,058
Income from continuing operations before income taxes	80,557	80,343	142,455
Provision for incomes taxes	21,223	5,895	38,557
Net income from continuing operations	59,334	74,448	103,898
Net income from discontinued operations, net of tax	—	1,285	7,590
Net income	$ 59,334	$ 75,733	$ 111,488
(1) The December 31, 2020 and 2019 presentation has been revised to conform to the current period presentation.

Comparison of Consolidated Results of Operations for the Years Ended December 31, 2021 and 2020

Revenue and Net Revenue

For a discussion of revenue, see "Consolidated Revenue by Product and Segment" above.

Provision for losses decreased by $43.1 million, or 14.9%, for the year ended December 31, 2021 compared to the prior year. The decrease in provision for losses was primarily a result of lower average loan balances in the U.S. and multiple rounds of U.S. government stimulus associated with COVID-19, partially offset by provisioning on Canada Direct Lending growth and upfront loss provisioning on rapid customer receivables growth late in the quarter in Canada POS Lending. Refer to "Loan Volume and Portfolio Performance Analysis" and "Segment Analysis" sections below for additional details.

Operating Expenses

Salaries and benefits were $237.1 million for the year ended December 31, 2021, an increase of $40.3 million, or 20.5%, compared to the prior year. Excluding costs associated with Canada POS Lending, salaries and benefits increased $25.8 million, or 13.1%, primarily due to timing and level of performance-based variable compensation and personnel investments to support Canada Direct Lending growth.

Occupancy costs were $55.6 million for the year ended December 31, 2021, a decrease of $1.7 million, or 3.0%, compared to the prior year. Excluding costs associated with Canada POS Lending, occupancy costs decreased $2.2 million, or 3.9%, primarily due to store closures in the U.S. during the second and third quarters of 2021.

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Advertising costs decreased $5.8 million, or 13.0%, year over year, and $7.1 million, or 15.9%, excluding Canada POS Lending. The prior-year period included costs for Verge Installment loans which have since been suspended, as described further in "Segment Analysis" below.

Direct operations were $60.1 million for the year ended December 31, 2021, an increase of $13.2 million, or 28.1%, compared to the prior year. Excluding costs associated with Canada POS Lending, direct operations decreased $1.2 million, or 2.6%, primarily driven by lower collection fees paid in the U.S. due to lower year over year demand and multiple rounds of significant U.S. government stimulus associated with the COVID-19 pandemic.

Depreciation and amortization expense increased $9.5 million, or 54.0%, year over year. Excluding costs associated with Canada POS Lending, depreciation and amortization expense decreased $1.0 million, or 5.6%, primarily driven by our store closures in the U.S. during the second and third quarters of 2021.

Other operating expenses were $74.7 million for the year ended December 31, 2021, an increase of $27.6 million, or 58.7%, compared to the prior year. Excluding costs associated with Canada POS Lending, other operating expenses increased $17.8 million, or 37.9%, primarily due to (i) $13.7 million of transaction costs related to our acquisition of Flexiti in March 2021, our acquisition of Heights in December 2021, and the Katapult and FinServ merger in June 2021, and (ii) $8.8 million of certain restructuring costs related to our second and third quarter 2021 store closures in the U.S.

Other Expense

Interest Expense

Interest expense for the year ended December 31, 2021 increased $24.6 million, or 33.9%, primarily related to (i) interest on debt acquired as part of the acquisition of Flexiti, (ii) higher year-over-year interest on our U.S. SPV, and (iii) interest expense associated with the additional issuance of our 7.50% Senior Secured Notes. An additional $2.1 million of interest was incurred for the year ended December 31, 2021, which represents interest on the 8.25% Senior Secured Notes for the period between July 30, 2021 and August 12, 2021. This is the period during which both the 8.25% Senior Secured Notes and 7.50% Senior Secured Notes were outstanding.

Equity Method Investment

We recognize our share of Katapult’s earnings or loss on a one-quarter lag. Our share of Katapult's earnings was $3.7 million for the year ended December 31, 2021, which included a gain from revaluing Katapult's public and private warrant liability. During the fourth quarter of 2021, we purchased an additional 2.6 million of Katapult's common stock for $10.0 million, which increased our ownership in Katapult from 19.3% to 25.2% on a fully diluted basis assuming full pay-out of the earn-out shares as of December 31, 2021.

On June 9, 2021, Katapult completed its merger with FinServ. As part of the merger, we received cash consideration of $146.9 million and retained ownership through shares after the merger. As of December 31, 2021, our total cash investment in Katapult is $37.6 million.

Loss on Extinguishment of Debt

Loss on extinguishment of debt for the year ended December 31, 2021 of $40.2 million was due to the redemption of the 8.25% Senior Secured Notes.

Provision for Income Taxes

The effective income tax rate for the year ended December 31, 2021 was 26.3%, consistent with the blended federal and state/provincial statutory rate of approximately 26%. The income tax expense includes nondeductible expense items related to the change in fair value of contingent consideration of $1.6 million, and nondeductible transaction costs of $1.2 million, partially offset by proportionally more net income in lower-tax rate jurisdictions, driven by the gain on the Katapult transaction of $146.9 million in the second quarter of 2021 and the loss on extinguishment of debt of $40.2 million in the third quarter of 2021.

Additionally, income tax expense includes the release of a valuation allowance of $0.4 million due to our share of Katapult's income, tax benefits related to share-based compensation of $0.8 million, $0.2 million tax expense of additional Texas accrual for 2020 due to the settlement of 2013 to 2019 Texas returns, and a tax benefit of $0.9 million for the recognition of research and development tax credit.

The effective income tax rate of adjusted tax expense included in Adjusted Net Income for the year ended December 31, 2021 was 23.5%.

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Comparison of Consolidated Results of Operations for the Years Ended December 31, 2020 and 2019

For a comparison of our results of operations for the years ended December 31, 2020 and 2019, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Results of Operations" in Part II Item 7 of our 2020 Form 10-K.

Segment Analysis

The following is a summary of portfolio performance and results of operations for the segment and period indicated (all periods unaudited except for Q4 2021 and Q4 2020). We report financial results for three reportable segments: US, Canada Direct Lending and Canada POS Lending.

U.S. Portfolio Performance

On December 27, 2021, we acquired Heights which accounted for approximately $472 million of U.S. Installment loans as of December 31, 2021. As the period between December 27, 2021 and December 31, 2021 did not result in material loan performance, we have excluded Heights from the table and related discussion below for the fourth quarter and year ended 2021.

(in thousands, except percentages)	Q4 2021	Q3 2021	Q2 2021	Q1 2021	Q4 2020
Gross combined loans receivable (1)
Revolving LOC	$ 52,532	$ 51,196	$ 47,277	$ 43,387	$ 55,561
Installment loans - Company Owned	137,782	137,987	139,234	142,396	167,890
Total U.S. Company Owned gross loans receivable	190,314	189,183	186,511	185,783	223,451
Installment loans - Guaranteed by the Company (2)	46,317	43,422	37,093	32,439	44,105
Total U.S. gross combined loans receivable (1)	$ 236,631	$ 232,605	$ 223,604	$ 218,222	$ 267,556
Lending Revenue:
Revolving LOC	$ 27,911	$ 27,377	$ 24,091	$ 26,923	$ 31,111
Installment loans - Company Owned	56,820	57,659	55,918	64,516	68,927
Installment loans - Guaranteed by the Company (2)	47,348	43,377	34,908	41,425	42,972
Total U.S. lending revenue	$ 132,079	$ 128,413	$ 114,917	$ 132,864	$ 143,010
Lending Provision:
Revolving LOC	$ 11,592	$ 8,140	$ 6,621	$ 5,039	$ 11,583
Installment loans - Company Owned	18,618	16,792	14,048	11,159	24,629
Installment loans - Guaranteed by the Company (2)	25,967	23,146	12,583	9,648	22,621
Total U.S. lending provision	$ 56,177	$ 48,078	$ 33,252	$ 25,846	$ 58,833
Lending Net Revenue
Revolving LOC	$ 16,319	$ 19,237	$ 17,470	$ 21,884	$ 19,528
Installment loans - Company Owned	38,202	40,867	41,870	53,357	44,298
Installment loans - Guaranteed by the Company (2)	21,381	20,231	22,325	31,777	20,351
Total U.S. lending net revenue	$ 75,902	$ 80,335	$ 81,665	$ 107,018	$ 84,177